115/08    7 October 2008

The OFT has referred the anticipated acquisition by Hospedia Ltd (Hospedia), owner of Patientline, of Premier Telesolutions Limited (Premier) to the Competition Commission.

Both companies supply NHS hospitals with Bedside Entertainment and Communication Systems (BECS), which offer patients a bedside phone and TV or other video entertainment.

BECS have been installed next to the majority of NHS hospital beds, and are typically supplied free of charge to hospitals. Suppliers specify how much customers will pay for phone and TV usage (for example, 20p a minute for calls, £2 for 2 hours of TV), and this 'end user pays' approach is known as the 'free-managed' model. Competition between BECS suppliers under this arrangement can be expected to affect what terms the hospital can secure for user charges, the quality and maintenance of systems, and what type of services are introduced in future (for example, the availability through the BECS terminal of video on demand or premium sports or film content).

Patientline alone accounts for over 70 per cent of free-managed BECS installed in NHS hospitals. Premier has a much smaller market share, but given the preference by hospitals for a service which does not 'eat into' their NHS budget, Premier currently offers hospitals the closest alternative to Patientline. This means that other potential suppliers, which would only supply hospitals if they were willing to pay up-front for BECS, would remain out of the market, and not replace any competition lost by the merger. Also, it is not clear that patients' use of their own portable TV or video devices would amount to sufficient competitive pressure on Patientline's BECS strategy post-merger.

The OFT has therefore concluded that this merger gives rise to a realistic prospect of a substantial lessening of competition in the supply of BECS to NHS hospitals, meeting the test for reference to the Competition Commission.

Simon Pritchard, OFT Senior Director of Mergers, said:

'Patientline has been the predominant supplier of these systems and under the current model favoured by hospitals, Premier is the closest competitive alternative as far as new and renewal contracts are concerned. While we recognise arguments that the free-managed model may be difficult to sustain, we cannot safely dismiss concerns on behalf of patients that warrant a closer examination by the Competition Commission.'

The Competition Commission is expected to report by 23 March 2009.

NOTES

1. The Reference Test - the OFT has a duty to make a reference to the CC if the OFT believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

2. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises, and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million, or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.

3. The CC may extend the 24 week period within which it is required to publish its report by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.

4. The full text of the decision will appear in the mergers section as soon as possible.