The Commerce Commission said today it has considered Midland RHA's and Health Waikato's revised mental health services contracts and is satisfied they are unlikely to breach the Commerce Act.
The Commission had declined to authorise the original contracts proposed by the RHA and the CHE, which included building a new mental health services facility at Waikato Hospital, because they were anti-competitive.
Commission Chairman Dr Alan Bollard said that the reaction by the RHA and the CHE showed that the Commission's decision had been absolutely correct.
The Commission had concluded that if it declined the authorisation the new facility would be built under revised contracts with only a short delay.
"That is exactly what is happening," Dr Bollard said. "There will be a new facility with little delay, there is still a 10-year contract for funding it, but that contract no longer excludes other organisations from using the facility."
The Commerce Act prohibits anti-competitive contracts, but allows them to be authorised if it can be shown that public benefits arising from them are greater than their detriments to competition.
In declining to authorise the previous contracts the Commission had concluded that no public benefits would arise from them.
It accepted that many public benefits would arise from building the new facility. However, it also concluded that these benefits would arise if the contracts were not authorised because the facility would be built soon anyway.
Building the facility did not depend on the Commission authorising anti-competitive contracts which would have excluded all current and potential mental health organisations other than Health Waikato for 10 years.
Furthermore the concern was not that the RHA and the CHE had proposed 10-year contracts. The contracts were anti-competitive because of the way they excluded other organisations.
"Nor was this a decision about the future Tokanui Hospital. The Commission's sole concern was whether anti-competitive contracts should have been allowed."
The contract for building a new mental health facility at Waikato Hospital now allows other organisations who contract with Midland Health to also use the facility to provide mental health services.
The new services contract no longer requires Health Waikato to be given favoured status after an initial three-year term. After three years under the new contract Midland Health would be able to buy services from any mental health organisation which could provide cost-effective services of the quality required.
