EU Competition Law and the NHS

EU Competition Law and the NHS Chair - Rachel Whitaker, Associate, Browne Jacobson LLP Elisabetta Zanon, Director, NHS European Office supported by

EU Competition Rules and the NHS Rachel Whitaker 7th July 2011

Hub Session Structure • Introductions • What is Competition law and its legal framework • A view from the NHS European Office on the interplay between competition law and the NHS • Do the NHS reforms hold competition law concerns for the NHS? • Questions/debate

What is Competition law? • What is Competition law? • Overarching legal framework • Anti-competitive agreements • Abuse of dominant position • Merger control • State Aid • Public Procurement

What is Competition law? • Law regulating the markets in which businesses and consumers purchase and sell goods and services and the conduct of those undertakings operating in them • Competition law derives from European legislation • Competition law is intended to: • Dismantle barriers to trade; • Increase competition; and • Give consumers a better deal

Overarching legal framework • European legal provisions: – • Treaty on the Functioning of the European Union: • Article 101 (prohibition on anti-competitive agreements) • Article 102 (prohibition on abuse of a dominant position) • Articles 107 – 109 (prohibition on illegal state aid) • Directives on the co-ordination of procedures for the award of public works contracts, public supply contracts and public services contracts (public procurement)

Prohibition on anti-competitive agreements • Chapter I of the Competition Act 1998 implements the TFEU provisions on anti-competitive agreements • Enterprise Act 2002 contains provisions addressing cartels and criminal charges • “agreements between undertakings, decisions by associations of undertakings or concerted practices which- (a) may affect trade within the United Kingdom, and (b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom, are prohibited unless they are exempt in accordance with the provisions of this Part”

Prohibition on anti-competitive agreements • Common breaches: • Price fixing • Sharing markets • Sharing customers • Information exchanging • EU Block Exemptions

Prohibition on abuse of a dominant position • Chapter II of the Competition Act 1998 implements the TFEU provisions on abuse of a dominant position • “any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom”

Prohibition On Abuse Of A Dominant Position • “Frankly my dear I don’t give a damn” • Abuse – enjoying a market position which allows you to act independently of market forces • Common breaches: • Excessive/predatory pricing • Refusal to supply • Tie-ins • Objectively justifiable?

Merger Control • European legislation sets the framework • European Commission regulates significant mergers affecting trade between member states • Devolved to national competition bodies and in some sectors specialist bodies: • For the NHS - CCP

Prohibition On Illegal State Aid • Article 107(1) TFEU: • Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.

Prohibition On Illegal State Aid • So what is state aid? • Financial assistance granted by a Member State • When is state aid unlawful? • Favours certain undertakings or the production of certain goods • Distorts or threatens to distort competition • Affects or potentially affects inter-state trade • Notifications, Exemptions, Frameworks, Market Economy Investor Test

Public Procurement Law • The European Directives on public procurement are implemented into UK law through: • The Public Contracts Regulations 2006 (as amended) • Public procurement law addresses how : • ‘contracting authorities’ purchase certain goods, works and services • tenders are conducted • remedies work where contracting authorities get it wrong

Interplay between EU competition rules and the NHS: A view from the NHS European Office Elisabetta Zanon 7 July 2011

Contents • NHS European Office and ourinterest in EU competitionrules • When EU competitionrulesapply • Potentialrisks for the NHS • When EU procurementrulesapply • Potentialrisks for the NHS

NHS European Office • Established at the end of 2007 to represent the English NHS to EU decision-makers • Part of the NHS Confederation • Informs and advises NHS organisations on EU affairs • Influences EU policy and law in the interest of the NHS • Has a broad policy focus

NHS interest in EU competition law • The NHS reforms have drawn a lot of attention to the application of EU competition and public procurement law to the NHS • But this is not a new area of interest for the NHS! • The application of these rules on the NHS has been an issue for some time • The NHS European Office has briefed NHS organisations

When EU competition rules apply? • They ensure a level playing field in the EU internal market, prohibiting practices or agreements which may affect trade • Competition rules also apply to providers of public services but only in so far as they do not obstruct the performance of public service tasks (art 106) • Tensions between EU competition rules and the MS freedom to organise and provide public services to their citizens • Grey area characterised by legal uncertainty and continually evolving in light of new Court cases and NHS reforms

When competition rules apply? • EU competition law applies to “undertakings” • Defined by European Court cases as: every entity engaged in economic/commercial activity (provision of goods and services in a market) regardless of its legal status and the way in which it is financed • Focus on the specific activity - case by case test required • NHS unlikely to be an undertaking if services are provided on a universal basis on the principle of solidarity • But an NHS trust may be acting as an undertaking when carrying out specific functions of a commercial nature

Potential risks for the NHS • The organisation and delivery of healthcareis a national competence • No appetite in the European Commission to start investigations on possible infringements: healthcaresectortoopolitically sensitive • Nevertheless, increasingnumber of complaints across EU from providers in the market • State aids complaints from private hospitals for compensation of operating losses in public hospitals or cross-subsidisation of commercial activities • Healthcare systems based on market competition are more exposed

When EU public procurement rules apply? • Different from EU competition rules, which apply to economic operators in the market • EU Public Procurement Directives govern the way in which public bodies purchase goods and services from operators in the market • Apply to NHS as bodies governed by public law • Health services classify as “Part B” – ie subject to a lighter public procurement regime

Potential risks for the NHS • Rules are seen as complex, burdensome, costly and unclear • Uncertainty for NHS organisations on when the rules apply and which procedure to follow • EU Remedies Directive – risk of legal challenge higher • How to ensure CCG will have sufficient expertise and skills? • Revision of the EU Directives has started – there are risks and opportunities for the NHS • NHS European Office pressing for NHS views to be taken into account by EU decision-makers

elisabetta.zanon@nhsconfed.org www.nhsconfed.org/europe

NHS Reforms and Competition Law • Do the proposed changes affect the status of NHS organisations as undertakings? • Competitive market • Any Qualified Provider • Lifting of private patient cap • Cross-subsidisation by the state • Integrated care pathways • Right to request

The Relevant Institutions • The Cooperation and Competition Panel • Monitor – the Sector Specific Regulator • The OFT

NHS Reforms And Public Procurement Law • Reorganisation of commissioning landscape • Change in roles and identities • No significant implications • Changes to note

Questions? Rachel Whitaker 0115 976 6538 rwhitaker@brownejacobson.com

what did you think?

EU Competition Law and the NHS