Commission not yet able to authorise Waikato health contracts
Published08 Jun 1995
The Commerce Commission said today, that based on the information currently available to it, at this stage it could not authorise the Health Waikato and Midland Health mental health services and facilities contracts.
The 10 year contracts involve Waikato Health providing mental health services and facilities to Midland Health. This includes building a new secure unit at Hamilton Hospital. Midland Health would purchase guaranteed access to the facilities as a precondition to their being built. Both parties would also agree to negotiate the prices of the services to be provided.
The Commission released a draft determination saying that the CHE and RHA have not yet presented enough information to compare the public benefits of the contracts with their detriments to competition.
Commission Chairman Dr Alan Bollard said that the Commission's preliminary view is that the contracts would lessen competition in a number of facilities and services markets in the general mental health and forensic mental health sectors.
The benefits claimed are upgrading of facilities, overcoming investment risk, economies of scale, economies of scope, locational advantages and community well being.
"Pending receipt of further information clarifying the issues ... the Commission is, at this stage, unable to conclude that the public benefits flowing from the proposal would outweigh the lessenings in competition that would result," the draft determination says.
The Commerce Act prohibits contracts which substantially lessen competition. However, it allows them to be authorised if it can be shown that public benefits outweigh detriments to competition - if there is doubt, then the Commission cannot authorise.
Interested parties have until June 16 to make submissions on the draft determination. A conference of the two applicants and interested parties will be held on July 5-7 at the Wellington Town Hall.
A final determination will be issued by the Commission by July 26.
In October last year the Commission published guidelines, known as the public benefits paper. They explain the economic and legal issues that the Commission will consider when weighing public benefits against detriments to competition.
