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From: Managed Care and Competition Law Conference
Medico-Legal Society of Queensland & ADF: Brisbane, March 1998

Trade Practices Act - "The Ramifications for Exclusive Contracts and Managed Care Arrangements"

Mr Andrew Wood

Introduction

I have been asked today to speak about the ramifications for exclusive contracts and "managed care arrangements". I have particularly noted the reference to "managed care" as it seems to represent a growing perception that the contractual arrangements under current purchaser provider model do indeed demonstrate many of the features of managed care arrangements.

The Trade Practices Act

I first want to outline a plain English version of the relevant provisions of Part IV of the Trade Practices Act. Lawyers in the audience might cavil at my rendering of several pages of complicated drafting and years of Judicial and tribunal reasoning into just a few paragraphs. But at any rate I hope the central messages will be clear and will establish the basis for what follows.

This, then is an outline of the main provisions of the Trade Practices Act that will impact upon purchaser/provider or "managed care" type arrangements.

Section 45

Don't enter into contracts arrangements or understandings with your competitors that:

• contain an exclusionary clause.
• substantially lessen competition in a market.

Section 45A

Contracts, arrangements and understandings about prices are deemed to substantially lessen competition.

Section 45D

Don't collude with another person to stop someone from supplying goods or services to or acquiring them from a particular business.

Section 46

Don't use a substantial degree of market power to:

• eliminate or damage a competitor
• prevent a person from entering a market
• deterring or preventing competitive conduct in a market.

Section 47

• Don't engage in exclusive dealing if that would substantially lessen competition.
• Don't force someone else's goods or services upon people with whom you deal.

Section 48

• Don't set a minimum price below which you will not allow your goods or services to be resold or advertised for resale.

Section 50

• Don't merge with someone if the result will be to substantially lessen competition in a substantial market for goods or services.

Exceptions under the Trade Practices Act

Next I want to outline some of the exceptions without which the plain English statement of the main provisions would not be complete.

Section 51

Don't worry about anything done in the State if it is specifically referred to and specifically authorised by an Act of State Parliament or Regulations made under an Act.

Section 88-91

You can ask the ACCC to authorise some of these arrangements if the public benefit outweighs the anti-competitive detriment.

Section 93-93A

• You can protect some exclusive dealing arrangements if you tell the ACCC about them.

Related Corporations

Some of these practices are permitted between related corporations.

Joint Venture and Collective Purchase Arrangements

Some pricing agreements within Joint venture or collective purchase arrangements are permitted.

Federal Trade Commission in the United States

The US Federal Trade Commission, unlike our own ACCC, issues advisory opinions on arrangements in the health industry. It also very kindly makes them available for World Wide Web access so that we can find out what is happening. I should also tell you that US Department of Justice and Federal Trade Commission publishes a joint statement on "Enforcement Policy and Analytical Principles Relating to Health Care and Anti-Trust". That is a very useful document and if you can get hold of a copy it is worth reading because it outlines what is referred to as a "Safety Zone" of operation. If the arrangement comes within that Safety Zone it will not breach the U.S. Anti-Trust legislation.

I should add, as a word of warning, that if you do obtain a copy, you will find references throughout to a concept known as the "Rule of Reason". That does not apply in Australia; but it is somewhat akin to our statutory tests for assessing authorisations and dealing with notifications. It attempts to balance harm to competition against any likely efficiencies or benefits in order to see, on balance, whether the arrangement is pro-competition or anti-competitive.

Australian Competition and Consumer Commission

At the moment, we have the ACCC saying to us that there are many things that we must not do. There is even a small publication put out by the ACCC, which you can buy for a modest sum, and which contains all kinds of examples of the arrangements that would breach the Act. It threatens huge penalties for breach. Indeed, I have purchased several copies which I have distributed to some of my clients.

Most of what you will hear from the ACCC is doom and gloom. Indeed I think that perception is likely to be supported by the ACCC actions against the New South Wales Anaesthetists and also by the ACCC actions against the health insurer, Health Partners Incorporated ¹, which was found to have engaged in forcing a buying group's services upon an affiliated pharmacy.

The ACCC is still developing policies for the application of the competition law in dealing with arrangements in the health industry. Unfortunately at the moment that policy appears to be developing in the context of prosecution action. I think the Commission needs to receive and deal with some applications for authorisation in order to balance the development of its policy.

Whilst the anti-competitive aspects of many of the arrangements that we have considered are real, I hope that some of you will be encouraged, after today, to consider how future arrangements might be developed that do not contravene the legislation, or which minimise the anti-competitive detriment and at the same time deliver public benefits.

¹ ACCC -v- Health Partners Incorporated(1998) ATPR 41-604 (Fed Ct 22/12/97 Mansfield J)