Allen & Gledhill secures clearance of proposed acquisition in private dialysis centres sector
On 29 May 2020, the Competition and Consumer Commission of Singapore (“CCCS”) announced its clearance of the proposed acquisition by Fresenius Medical Care Singapore Pte. Ltd. (“FMC SG”) of the issued share capital in RenalTeam Pte. Ltd. (“RT”) (collectively, “Parties”) (“Proposed Transaction”). The Parties operate private dialysis centres providing kidney dialysis to end stage renal disease (“ESRD”) patients in Singapore.
CCCS concluded that the Proposed Transaction, if carried into effect, will not lead to a substantial lessening of competition within the relevant markets in Singapore and, accordingly, will not infringe section 54 of the Competition Act (“Act”). Section 54 of the Act prohibits mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore.
CCCS was notified of the Proposed Transaction by FMC SG on 17 March 2020. CCCS cleared the Proposed Transaction following a public consultation conducted from 26 March 2020 to 9 April 2020 during which CCCS contacted key stakeholders including competitors and customers. CCCS also engaged various government agencies to gather relevant information necessary for CCCS’s assessment of the Proposed Transaction.
The Allen & Gledhill Competition & Antitrust Practice acted for the acquirer in the sole notification made by the acquirer. This was the third merger reviewed by CCCS in the dialysis sector. Prior to notification of the Proposed Transaction, CCCS had also conducted a post-action evaluation of its merger clearance in 2012 of the proposed acquisition by Asia Renal Care (SEA) Pte. Ltd. of Orthe Pte. Ltd. to assess the impact of the merger on competition in the dialysis sector.
Parties
FMC SG is part of a group of companies (“FMC Group”) which provides dialysis products and services worldwide. The FMC Group provides:
- Haemodialysis (“HD”) and peritoneal dialysis (“PD”) services in Singapore to ESRD patients through clinics it operates; and
- HD services, on an outsourced basis, in clinics operated by third party service providers.
One of the companies in the FMC Group offers management services to dialysis centres. FMC SG is also involved in the sale of dialysis products and consumables in Singapore, which are used in the process of administering HD and/or PD treatments to ESRD patients.
RT is primarily involved in the supply of HD services to ESRD patients in Singapore through clinics it operates. RT also provides HD services, on an outsourced basis, in clinics operated by third party service providers.
Relevant markets
In assessing the Proposed Transaction, CCCS considered three relevant markets:
- Provision of outpatient HD services to ESRD patients by private sector providers and restructured hospitals (including joint ventures between restructured hospitals and private sector providers), excluding voluntary welfare organisations;
- Provision of outsourced HD services to third party dialysis centres (i.e. outsourced clinics) in Singapore; and
- Provision of HD products and consumables in Singapore, with further examination in respect of specific HD products and/or HD consumables.
Competition assessment for each market
Provision of outpatient HD services to ESRD patients
CCCS assessed this market on a (1) Singapore-wide basis and (2) within narrower geographic areas where the Parties have nearby dialysis centres. CCCS found that although the merged entity will be the largest market player on a Singapore-wide basis, potential and existing HD service providers are able to set up new dialysis centres to compete with the merged entity. Patients can choose to switch providers given the availability of alternative HD service providers with spare capacity. Potential growth in demand for outpatient HD services and the potential for new entry and expansion can accordingly serve as a competitive constraint on the merged entity. The possibility of coordination or collusion on prices is also unlikely as potential increased demand for outpatient HD services and potential new competitors can discourage collusion among the merged entity and competitors.
Provision of outsourced HD services to outsourced clinics
CCCS found that barriers to entry and expansion are unlikely to be high as the resources needed for a HD service provider to provide such outsourced HD services are similar to setting up a new dialysis centre. It is likely that the outsourced clinics will have bargaining power as they are able to self-supply by operating HD services at their own dialysis centre. Customers may also source for alternative providers by means of competitive tender processes. The customers’ bargaining power and the potential for new entry can serve as a competitive constraint on the merged entity.
Provision of HD products and consumables in Singapore
CCCS found that the merged entity will still face competition as competitors can continue to compete for the remaining customers of HD products and consumables in Singapore. Further, HD service providers generally have no difficulties in switching suppliers for HD products and consumables, and have alternative choices of suppliers of HD products and consumables in Singapore.
CCCS’s Grounds of Decision will be made available in due course on its public register.
Reference materials
The following materials are available on the CCCS website www.cccs.gov.sg:
