Completed acquisition by BUPA Finance plc of Clinovia Group Limited

Affected market: Home healthcare services

No. ME/2936/07

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 22(1) given on 9 May 2007. Full text of decision published 22 May 2007.

Please note that square brackets indicate figures or text which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.

PARTIES

BUPA Finance plc is a direct subsidiary of British United Provident Association Limited (BUPA), a global health and care organisation. BUPA has three principal divisions in the UK: BUPA Hospitals (BUPA PMS) which owns 25 private hospitals; BUPA Insurance (BUPA PMI); and, BUPA Care Homes. BUPA is a private company limited by guarantee. As such it has no shareholders and all surpluses are reinvested back into the business.

Clinovia Group Limited (Clinovia) is a provider of healthcare and related services in a home (non-hospital) environment. It has three business areas: Contracted Care (dealing with the compounding and delivery of nutritional and other drugs to patients at home); Medicines Management (dealing with the dispensing, delivery and coordination of prescribed high cost medication to patients at home); and, Complex Care (providing integrated care packages for patients with higher levels of dependency who have typically been in hospital for long periods of time, including social, medical and educational support). Clinovia's UK turnover for the year ended September 2006 was £103 million.

TRANSACTION

BUPA Finance plc acquired 100 per cent of the shareholding in Clinovia following an open auction process. The completion date was 1 December 2006. The extended statutory deadline, which expires before the administrative deadline, is 9 May 2007.

BUPA gave initial 'hold separate' undertakings to the OFT under section 71 of the Enterprise Act 2002 (the Act) on 2 April 2007.

JURISDICTION

As a result of this transaction BUPA and Clinovia have ceased to be distinct. The UK turnover of Clinovia exceeds £70 million, so the turnover test in section 23(1)(b) of the Act is satisfied. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

ASSESSMENT

There is no direct horizontal overlap between the parties. However, there are vertical links between them in relation to the interaction between BUPA's pre-existing operations in private medical insurance (PMI) and private medical services (PMS), and Clinovia's activities in high-tech home healthcare services.

A number of third party concerns relating to potential vertical foreclosure which could result from the merger at different levels of the supply chain were received by the OFT. The OFT therefore considered it necessary to assess these issues further to determine whether the merger has created or increased both the ability and incentive for BUPA to undertake foreclosure strategies, and thereby ultimately could harm consumers.

The prime concern that BUPA would have the ability and incentive to foreclose rivals of Clinovia in high-tech homecare provision fails simply because BUPA accounts for such a small share of relevant homecare demand that any exclusion of rival suppliers from its business would not foreclose a substantial part of the relevant market. The overwhelming size of NHS demand, and the majority of private demand, a growing sector, demonstrates that rivals would not be materially weakened and competition would not be harmed. Indeed, Clinovia's rivals other than HaH do not currently have access to BUPA demand, which is served exclusively by HaH, the largest provider of homecare services across NHS and private patients. To the extent the merger results in a transfer of the BUPA contract from HaH to Clinovia, the merger is actually deconcentrative in the homecare sector, by transferring volume from the largest player to a smaller rival. 

A second concern was that rival PMI providers of BUPA could be restricted or discriminated against in their access to Clinovia. Taking into account that the PMI sector currently sources nearly its entire homecare requirements from providers other than Clinovia (in particular, HaH which has an established reputation as the leading homecare provider to private patients), the OFT believes that this concern is without merit.

A final allegation was that the private hospital (PMS) sector could be foreclosed as BUPA could, through a variety of means, influence the direction of patients from (non-BUPA) hospitals into homecare and even adopt a discriminatory policy by targeting this strategy in areas where BUPA does not have PMS capability and avoiding areas where it does. The OFT has found no evidence that Clinovia's business directly competes, as opposed to being largely complementary, with private hospital treatment. Neither was any evidence provided to support a belief by the OFT that BUPA could override the direction of homecare provision over clinical factors, including the nature of the conditions being treated and patient requirements. The lack of concern from the majority of PMS hospital groups reinforced the OFT's analysis dismissing this allegation.

In summary, on the basis of evidence provided in the course of its investigation, the OFT does not believe that BUPA has the ability to foreclose supply at any level of the private medical supply chain as a result of the merger. The OFT does not therefore hold a positive belief, objectively justified by relevant facts, that the merger give rise to realistic prospect of a substantial lessening of competition by means of foreclosure effects in one or more of homecare services, PMS or PMI in the UK.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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