AdC sanctions hospitals and respective association for concerted behavior
Press release 12/2022
July 1st, 2022
AdC sanctions hospitals and respective association for concerted behavior
The decision
The Portuguese Competition Authority (AdC) sanctioned the Portuguese Private Hospitals Association (APHP), G.T.S - Grupo Trofa Saúde, SGPS, S.A. and Hospital Privado da Trofa, S.A. (jointly, the Trofa Group), Hospital Particular do Algarve, S.A. (HPA), José de Mello Capital, S.A. and CUF, S.A. (jointly, Mello Group), Lusíadas SGPS, S.A. and Lusíadas, S.A. (jointly, Lusíadas Group) and Luz Saúde, S.A. (Luz) for a concerted behavior which resulted in a restriction of competition in the contracting of hospital health services by the public health sub-system ADSE.
ADSE is a public health sub-system used mostly by civil servants in Portugal and is complementary to the national health system (NHS).
The illegal behavior
The AdC concluded that the abovementioned healthcare companies and groups coordinated among themselves the strategy and negotiating position to be adopted in the context of the negotiations with ADSE. Moreover, the behavior was done through and with the joint participation of APHP, between 2014 and 2019.
The mentioned agreement and concerted behavior were aimed at fixing the level of prices and other commercial conditions, within the scope of the negotiations with the ADSE, by the health companies and groups referred to. It also aimed at coordinating the suspension and threat of termination of the agreement concluded with the ADSE to prevent the settlement of the invoicing by the ADSE for 2015 and 2016.
The collective action of these health companies and groups, through and with the joint participation of the APHP, allowed them to put pressure on the ADSE to accept prices and other commercial conditions that were more favorable for those companies and groups than those that would result from individual negotiations within the scope of the normal functioning of the market. By acting together, they substantially reduced the negotiating power of the ADSE.
Indeed, in what concerns the suspension and threat of termination of the agreement entered into with ADSE, this would only exert sufficient pressure on ADSE's health subsystem if adopted jointly by the majority of these health companies and groups, as only then would it be possible to significantly limit the access of beneficiaries to health care provision through the ADSE network (contracted regime), forcing beneficiaries to resort to the free regime of the subsystem (more penalizing for beneficiaries and more advantageous for those hospitals).
The Portuguese Competition Law applies to both companies and associations of companies. The associations of undertakings which, through their bylaws or their initiatives, create or promote limitations on the freedom of action of their members in the market or promote their concerted action are liable. For example, a sectorial association should not be the interlocutor of its members in the scope of their commercial negotiations with common clients. Know the Competition Promotion Guide for Business Associations [in Portuguese].
Background
The case was opened by AdC in March 2019, following several complaints and media reports. In May of the same year the AdC carried out unannounced inspections at the premises of the referred entities, located in Lisbon, Portimão and Porto.
In July 2021, the AdC issued a Statement of Objections, having given the opportunity to all the addressees to exercise their right of hearing and defense, which was duly considered in the adopted decision.
For more information on the case, please see the AdC’s website.
The sanction
The sanctioning decision resulted in a total fine of €190.995.000
The total fine is applied as follows:
- APHP: €50.000
- Trofa Group: €6.696.000
- HPA: €8.818.000
- Mello Group: €74.980.000
- Lusíadas Group:€34.242.000
- Luz: €66.209.000
The fines imposed by the AdC are determined by the turnover of the companies and healthcare groups in the affected market in the years of the illegal behavior. With regard to APHP, the AdC has considered, for this purpose, the total turnover of the association in the last year of the infringement.
In addition, according to the Competition Law, fines cannot exceed 10% of the turnover of the referred entities in the year prior to the date of adoption of the decision.
When setting the fine, the AdC takes into account the seriousness and duration of the infringement, the degree of participation in the infringement, the economic situation of the businesses, among other circumstances (see the AdC Guidelines on the methodology to be applied in the application of fines ).
The AdC's sanctioning decisions may be appealed. The appeal does not suspend the execution of the fines. The addressees may request the Competition, Supervision and Regulation Court to suspend the enforcement of the decisions if they (i) demonstrate that the decisions cause them considerable damage and (ii) provide an effective guarantee in its place.
