The Competition Appeal Tribunal (CAT) has dismissed an
appeal by the Federation of Independent Practitioner Organisations (FIPO)
against the CMA’s final report and remedies in its market investigation into
private healthcare. The CAT reached its judgment by a majority, in the
face of a powerful dissenting opinion by Dermot Glynn, the panel’s
economist. What is interesting in this outcome is the vigour with which
the dissenting opinion was expressed. There have been only three previous
dissents in challenges before the CAT, yet the issue in those cases was
relatively self-contained relating to judicial review against Ofcom.
Here, the economist member concludes that the CMA’s decision was irrational.
The CMA concluded in its final report that competition between
private doctors is not prevented or restricted by any market power exerted by
private medical insurers (PMIs). Rather, it considered that adverse
effects on competition (AEC) arose from the lack of public information on
doctors’ fees. It therefore considered that the appropriate remedy was an
order to consultants to publish information on their fees and performance.
FIPO challenged the CMA’s findings on a number of grounds,
all of which were dismissed by the CAT. The majority also considered that
the view expressed in the dissenting opinion was based on an incorrect
interpretation of the scope of judicial review where a review of the merits of
the underlying decision is forbidden territory.
The dissenting opinion makes interesting reading. Glynn
concluded that it was irrational for the CMA to find that fee-capping and
limits on top-up fees did not necessarily restrict patients’ choice and
constitute an AEC. He commented that the CMA did not consider two aspects
of consumer choice, namely where a majority of PMI patients are: (a) unlikely
to have a choice between a consultant recommended by the PMI and another
offering better service but requiring a top-up fee, and (b) unlikely to have a
choice between different levels of service offered by the same
consultant. Rather, the CMA seems to have based its conclusion on its
finding that there was no change in the aggregate number of consultants; hence
no AEC as regards consumer choice. However, Glynn took the view that the
number of consultants is not necessarily correlated with the degree of patient
choice in the market in terms of different pricing propositions and quality.
Glynn could see no competition law or other justification
for effectively preventing top-up fees being sought by many individual
consultants whose expertise or popularity would allow this, and whose patients
would be willing to pay. He considered, also, that the mere
possibility of competition below the cap ignores the operation of the market in
practice: ‘The absence of competition on price is in my opinion
inescapably an AEC by comparison with a normally competitive market […] For the
CMA to find no AEC on the ground that consultants “could” compete below the fee
caps did not have regard to the economic realities, and was therefore
irrational’ (para 87, Judgment).
Glynn considered that the remedy was not effective because
providing more information on fees does not address the lack of competition on
fees: ‘There is only limited competition through top-up fees. There is
thus no real price competition between consultants so far as policyholders are
concerned. On that basis, providing information about fees to policyholders
will do nothing to improve the competitive outcome because there is no
competition on those fees in the first place. Providing information about
distorted fees cannot be expected to improve the competitive outcome’ (para 96,
Judgment).
The CAT’s judgment may be appealed to the Court of Appeal on
a point of law.
Federation of Independent Practitioner Organisations v
CMA [2015] CAT 8, 29 April 2015
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