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CCCS invites feedback over merger concerns on PAH deals

CCCS invites feedback over merger concerns on PAH deals

Source: Business Times
Article Date: 22 Jun 2019
Author: Fiona Lam

Response will help watchdog assess if planned consolidation of two clinical laboratories will reduce competition.

The Competition and Consumer Commission of Singapore (CCCS) is inviting public feedback on the two-year commitments proposed by Pathology Asia Holdings (PAH) to address competition concerns in its planned merger of two private clinical laboratories.

PAH, a unit of private equity giant TPG Capital Asia, intends to integrate the businesses of the two labs - Innovative Diagnostics and Quest Laboratories - after acquiring them last year.

Both labs provide in-vitro diagnostic (IVD) tests in Singapore. Such tests are used to detect diseases or other conditions and monitor a person's health, CCCS said in a media statement on Friday.

The public consultation will run from June 21 to July 5.

The feedback collected will help CCCS assess whether PAH's commitments will sufficiently address the competition concerns arising from the merger.

PAH's four proposed commitments relate to third-party IVD tests, exclusivity, early contract termination, and prices offered to customers.

It said that it is entering into the commitments even though it "disagrees with the (competition) concerns identified by the CCCS", and that it believes that the merger does not result in substantially reducing competition in any market in Singapore.

PAH's first commitment is to ensure that other competing labs have access to the third-party IVD testing services supplied by Innovative and Quest, at fair, reasonable and non-discriminatory prices, and at service standards consistent with those offered by the two labs to their customers.

Competing labs sometimes need to send out certain tests to third-party labs if they lack the scale to perform them in-house.

PAH said that it will also allow contracted customers of Innovative and Quest to switch to other suppliers, as the two labs will not lock in customers on an exclusive basis in their contracts. This gives an incentive for competing labs to expand their volume and/

or range of tests supplied.

PAH is also committing to allow early termination of contracts without cause. Likewise, this enables customers to switch to other labs more easily.

Lastly, the merged entity will maintain its prices for two types of customers: private hospitals which do not operate their own in-house labs, as well as health-screening companies.

PAH said that it will keep the current terms of its contracts with these customers, which generally need high volumes of IVD tests and have other requirements that can only be met by Innovative and Quest.

PAH proposed that the commitments be in effect for two years from the date of CCCS's final decision on the merger.

Instead of appointing a monitoring trustee to monitor the two labs' compliance with the commitments, PAH will individually notify all customers affected by the commitments.

During CCCS's first quick assessment of the deal, customers and competitors had earlier given feedback that there may not be enough competition after the two labs are merged.

In the review's in-depth second stage, which began in November 2018, the competition regulator found that customers generally perceive the two labs as the closest competitors to each other as they are major providers of IVD tests in Singapore.

There was also third-party feedback reiterating concerns that other IVD test providers - such as private hospital clinical labs and other private independent clinical labs - may not be able to exert sufficient competitive constraint on the merged entity, CCCS said on Friday.

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.




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