OFT satisfied with 'fix-it-first' remedy in GHG/Nuffield hospital merger

57/08 1 May 2008

The OFT has cleared the completed acquisition by General Healthcare Group (GHG) of seven hospitals from Nuffield Hospitals (Nuffield), following the on-sale of two of the nine hospitals GHG had originally acquired.

In this case, GHG had correctly concluded that the original acquisition would be likely to substantially lessen competition in the local private hospital markets in Nottingham and in the Gerrards Cross area. As a result, GHG sought to implement a 'fix-it-first' remedy by divesting the two relevant hospitals to other hospital groups who did not have a presence in the affected markets. The OFT was satisfied with the on-sale arrangements because they removed the problematic overlap and each buyer effectively met the OFT's purchaser approval criteria, which usually apply in undertakings in lieu scenarios.

The OFT also assessed the competitive effects of GHG's retention of the remaining seven Nuffield hospitals. As it ultimately concluded that the residual merger did not result in local or national competition concerns, the OFT was satisfied that the up-front remedy had restored competition in all the required relevant areas.

This case demonstrates that the OFT will take a pragmatic, outcome-focused approach to the merger control process if it is satisfied that a party’s fix-it-first solution is as clear-cut and comprehensive as an undertakings in lieu outcome would have been.

Simon Pritchard, OFT Senior Director of Mergers, said

‘We are content that GHG's on-sale solution covered all the necessary bases we would ordinarily look for in a first phase remedy outcome. As a result, private patients and their healthcare providers will benefit from restored hospital competition which the original transaction would have eliminated in both Gerrards Cross and Nottingham.’

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 full text of this decision will appear in the mergers section.

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