MERGER APPROVAL: AFROCENTRIC HEALTH (RF) LTD AND DENTAL INFORMATION SYSTEMS (PTY) LTD
The Competition Tribunal has approved, without conditions, the merger whereby AfroCentric Health (RF) (Pty) Ltd (AfroCentric) will acquire Dental Information System Holdings (Pty) Ltd (DENIS).
On completion of the proposed transaction, the AfroCentric Group will own and control the DENIS Group, which will operate as a separate legal entity within the AfroCentric Group.
The Tribunal’s reasons for its decision will be made available in due course.
Merging parties
AfroCentric is controlled by ACT Health Care Assets (Pty) Ltd (ACT Health). The AfroCentric Group is an investment holding company in the healthcare sector. It operates through various subsidiaries, providing affordable and quality health administration, health risk management and complementary solutions across the healthcare value chain to medical scheme clients and their members. Of relevance to the competition assessment of the transaction are the activities of the AfroCentric Group as health administrator and managed health care organisation.
DENIS is controlled by EOH Abantu (Pty) Ltd (EOH Abantu). DENIS is a registered managed care organisation specialising in managing dental benefits. It offers a set of dental benefits, managed by a rules-based management system, which enables dental costs to be effectively managed to the benefit of patients, medical schemes and dentists.
BACKGROUND
Competition Commission assessment
The Commission, which assesses large mergers before referring them to the Tribunal for a decision, assessed the effect of the proposed transaction in: (i) the national narrow market for the provision of managed dental healthcare services; (ii) the national broad market for the provision of managed healthcare services; and (iii) the national market for the provision of medical scheme administration services.
The Commission found that the AfroCentric Group and DENIS are not close competitors and was of the view that the transaction is unlikely to result in significant merger-specific unilateral effects in the market for the provision of managed dental care services.
Among others, the Commission assessed whether the merging parties will have the ability or incentive to leverage the dominant position of DENIS in the narrow market for the provision of managed dental care services to the broader market for managed care services. The Commission also considered the potential effects of such a leveraging strategy on competition.
The Commission was of the view that the proposed merger is unlikely to result in substantial portfolio effects as the merger parties will continue to face competition from players active at both the administration level and managed care services level.
Third party concerns
The Commission received various concerns from third parties. It was, however, of the view that the proposed transaction is unlikely to substantially prevent or lessen competition and noted that there were no public interest concerns.
Intervention application heard on 17 July 2020
The Dental Professionals Association (DPA) applied to the Tribunal to intervene in the merger proceedings, asking that the proposed merger be prohibited. In the alternative, DPA sought an order to the effect that the merger is approved subject to conditions. DPA also proposed remedies.
The merger parties, being respondents in the intervention application, requested that the DPA's application to intervene in the merger proceedings be dismissed with costs.
They submitted, among others, that the DPA's intervention was aimed at using the Tribunal proceedings to address concerns it has with the dental managed care industry and which have no relation to the proposed transaction.
They also alleged that the DPA's intervention in these proceedings was part of a long-standing dispute which the DPA has in respect of managed care organisations (MCOs) and that the DPA was seeking to use the Tribunal process as a means to ventilate its frustration with MCOs.
Pursuant to the virtual hearing of the intervention application on 17 July 2020, the Tribunal directed that the DPA can participate in the proceedings by making written submissions prior to the hearing and oral submissions at the hearing on the following limited issues:
- Whether the merger is likely to substantially prevent or lessen competition;
- The level and trends of concentration, and history of collusion, in the market;
- The ability of small and medium business or firms controlled or owned by historically disadvantage persons to effectively enter into, participate in, or expand within the market; and
- The promotion of a greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons and workers in firms in the market.
Issued by:
Gillian de Gouveia, Communications Officer
On behalf of the Competition Tribunal of South Africa
Tel: +27 (0) 12 394 1383
Cell: +27 (0) 82 410 1195
E-Mail: GillianD@comptrib.co.za
Twitter: @comptrib
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