Newsroom

iSOFT/Torex merger will not be referred if undertakings are given

56/04    24 March 2004

The completed acquisition by iSOFT Group plc of Torex plc will not be referred to the Competition Commission if iSOFT gives suitable undertakings to address the competition concerns arising from the merger, the OFT has decided.

The OFT does not believe that it may be the case that the merger may be expected to result in a substantial lessening of competition (SLC) in relation to the supply of Patient Administration Systems (PAS) to NHS hospitals.  But the OFT does believe that it may be the case that the acquisition may be expected to result in a SLC in relation to the supply of Laboratory Information Management Systems (LIMS) to NHS hospitals.  LIMS are computer systems used to manage laboratory processes in hospitals or Trusts.

The National Programme for IT (NPfIT) has changed the way in which NHS hospitals in England procure their IT systems.  Under the programme, five Local Service Providers (LSPs) are responsible for providing IT services to the NHS by selecting their preferred software suppliers (also known as preferred application providers or PAPs).

Although Torex has not been selected by any of the LSPs to provide PAS or LIMS under the NPfIT, the OFT found that there will still be some scope for future competition for the supply of both products.  iSOFT and Torex competed for PAS and LIMS contracts prior to the implementation of the NpfIT.  The evidence leads the OFT to believe that, but for the merger, Torex would have had the incentive and ability to maintain such competition in LIMS, but not in PAS.   While there are alternative suppliers of LIMS, they might not exert sufficient competitive constraint on the merged iSOFT/Torex in the future.  The OFT therefore believes that it may be the case that the merger may be expected to result in a SLC in the supply of LIMS.

This decision follows the Competition Appeal Tribunal (CAT) judgment remitting the case  back to the OFT in December of last year and the Court of Appeal's judgment on this matter in February.  The OFT has considered the case afresh in light of further evidence and of the CAT's and the Court of Appeal's judgments, and the decision is made in line with the reference test set out by the Court of Appeal.

iSOFT has indicated that it is willing to offer an undertaking to divest the Torex LIMS business, including employees, intellectual property rights, and legacy contracts.

John Vickers, OFT Chairman, said:

'In the light of all the evidence now available, and on the basis of the merger reference test set out by the Court of Appeal, the OFT believes that the duty to refer this merger is met in relation to LIMS but not PAS.  The undertaking offered by iSOFT appears to remove the competition concern and we invite comments on it.'

The OFT will shortly begin a consultation process in respect of the proposed undertakings.

NOTES

1. The Enterprise Act 2002 empowers the OFT to refer to the CC a completed or anticipated merger for investigation and report where such merger creates or enhances a 25 per cent share of supply in the UK (or a substantial part thereof) or where the UK turnover associated with the enterprise being acquired is over £70m, and where the OFT believes 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 any market or markets in the UK.

2. The OFT may, instead of making a reference to the Competition Commission, accept undertakings from an appropriate party to take such action as it considers appropriate to remedy, mitigate or prevent the substantial lessening of competition or any adverse effect which has or may have resulted from it (or may be expected to result from it)

3. iSOFT's acquisition of Torex was initially considered by the OFT as a proposed merger and the OFT decided not to refer the merger to the Competition Commission on 7 November 2003.  Following an appeal to the CAT by IBA Health Ltd, the CAT quashed the OFT's decision and remitted the case back to the OFT for re-examination on 3 December 2003.  On 19 February 2004, the Court of Appeal dismissed the OFT's and iSOFT's appeals against the decision of the CAT, but clarified important points of law.

4. The NPfIT is designed to allow immediate electronic access to a patient's entire medical records from any part of the NHS, so clinicians can always see a patient's entire case file when treating them, thus facilitating better clinical care as well as efficiency savings for the NHS.  The programme has four particular goals: electronic appointment booking, an electronic care records service, electronic transmission of prescriptions, and fast, reliable underlying IT infrastructure.

5. Patient Administration Systems (PAS) are used by hospitals primarily to record personal details for each patient.

6. The text of this decision will be placed in the mergers section of the website and will also be highlighted in the Weekly Gazette as soon as is reasonably practicable.

Back to:2004