Competition Act 1998 - Fee Rates


Competition Act 1998 – Fee Rates

1.1 I have been asked to provide a short note on the legal implications of recommending fees which has arisen in the context of locum fee rates. I have kept the note necessarily brief and will be happy to answer any questions at the meeting.

1.2 As summarised below, recommending fees is unlawful under the Competition Act and the consequences severe

2 Office of Fair Trading (OFT)

2.1 The OFT is responsible for policing the Competition Act. Its primary role is to protect consumers’ (interpreted widely) and enforce UK competition policy. OFT case officers regularly read the trade press for evidence of anti-competitive practices.

3 The Competition Act

3.1 The Act outlaws anti-competitive behaviour and prohibits any agreements, business practices or conduct which have a damaging effect on competition in the UK. The principal offences are known as the Chapter 1 and Chapter 2 prohibitions.

3.2 The Chapter 1 Prohibition

This prohibits :

“agreements between undertakings, decisions by associations of undertakings and concerted practices which prevent, restrict or distort competition or are intended to do so, and which may affect trade within the United Kingdom”.

Undertakings

This includes companies, firms, business partnerships (such as GP partnerships) and individuals operating as sole traders. Individual doctors working as independent contractors - such as locums, fall within the definition of sole traders and an agreement between a number of them (whether informally or through a formal locum group) as to the price at which they perform, for example, sessions would be unlawful.

Associations of undertakings

This includes trade and professional associations. The BMA falls within this category.

Agreements which are prohibited between undertakings under Chapter 1 include:-

  • Fixing purchase or selling prices
  • Sharing markets
  • Limiting or controlling markets

The OFT take the view that recommendations/guidance issued by professional bodies to members as to fee rates, is likely to amount to price fixing. Guidance given orally would also be caught. The OFTs position on price fixing is that it amounts to “the most serious” form of anti-competitive conduct.

3.3 The Chapter 2 Prohibition

This prohibits the abuse by one or more undertakings of a dominant position in a market which may affect trade within the United Kingdom.

The Prohibition is breached where the undertaking is in a dominant position (as a general rule, an undertaking is unlikely to be considered dominant if its market share is less than a 40%) and has abused its position.

Examples of the types of conduct which are likely to be considered as an abuse of a dominant position include:-

  • Imposing unfair selling prices
  • Limiting markets

What constitutes a market will vary according to the circumstances. A locum group which, for example, had more than 40% share of the available locum market in a geographical area, is likely to be considered dominant in that area.

4 Consequences of breaching the Competition Act

The OFT have wide ranging powers including the right to enter premises and search for and retain documents. If an undertaking infringes either prohibition (above) it, its members or both could be liable for a financial penalty of up to 10% of turnover.

5 The BMA and Fee Guidance for Locums

5.1 The BMA used to publish fee guidance for locums (FGS12).

5.2 Following an investigation, the OFT determined that the BMA’s fee guidance was anti-competitive and in breach of the Chapter 1 prohibition. . The OFTs concern was that FGS12 encouraged locums to align their prices, irrespective of skills and experience. This had the effect of price co-ordination which distorted competition. The BMA’s argument that FGS12 was merely guidance was rejected.

5.3 As a consequence, the BMA withdrew FGS12 in April 2000 and has given an undertaking, to the OFT, that no further fee guidance for locums (whether written or verbal) will be published. BMA staff have been advised accordingly.

5.4 There has been a suggestion that some LMCs may still be recommending locum fee rates, using BMA data (derived from the withdrawn FGS12). In the light of the above, so as to protect the Association, it follows that if evidence of such practices comes to light, then the Director of Legal Services must be notified immediately. If necessary, the BMA will take formal steps to disassociate itself from such guidance.

6 Local Medical Committees (LMC)

6.1 Although LMCs fulfill certain statutory functions, in practice, many provide a wide range of additional services to local GPs. I have been asked whether a LMC can recommend locum fee rates.

6.2 The short answer is no. The OFTs view is that a LMC is an Association of Undertakings above). This is because a LMC consists of representatives of GP Practices. A decision by a LMC to publish fee guidance will be a decision by an Association of Undertakings and, as such, a LMC would be prohibited, by the Competition Act, from recommending locum fee rates.

JONATHAN WATERS
Director of Legal Services

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