Commission warns GP's about price fixing

18 May 2005

Commission warns GP's about price fixing

The Commerce Commission has issued warnings to individual GPs who met last year and collectively decided to set a maximum fee level for a specific group of patients. The GPs were proposing then to join the Dunedin Primary Health Organisation (PHO).

A Commission investigation found that these GPs had met and collectively decided on maximum patient fees charged for patients aged between 6 and 17. The Commerce Act prohibits a range of anti-competitive conduct, including price fixing between competitors.

"An agreement as to maximum fees results in a base price being created, thereby harming patients through higher average prices," said Commission General Manager Geoff Thorn.

"GPs need to be aware of the price fixing provisions of the Act, especially when they are talking with other GPs. We urge competing GPs to avoid talking about prices, and to avoid exchanging pricing information."

Mr Thorn said the Commission's investigation found no significant detriment in this instance.

Background
The purpose of the Commerce Act is to promote competition in markets for the long-term benefit of consumers in New Zealand. To this end, the Act prohibits a range of anti-competitive conduct.

Of relevance in this instance is section 30 of the Act, which prohibits competitors from agreeing to fix prices for goods and services they supply or acquire. Section 27 deems such behaviour to substantially lessen competition.

The price fixing provisions of the Act prohibits a range of collective behaviour among competitors (including pricing formulae, maximum prices and fee schedules).

Price fixing is considered harmful because it interferes in the competitive determination of prices, resulting in potentially higher prices for consumers.

If the Court finds that a person has breached the Act, substantial penalties may be imposed: up to $10 million for companies, and up to $500,000 for individuals.

PHOs are local organisations comprising GPs and other health professionals that provide primary health services to people enrolled with them. There are currently 77 PHOs throughout the country. The Government has allocated funding for PHOs and has been progressively increasing that funding, commencing with those with high health needs.

As more funding becomes available, other categories of patients have been added, including 6-17 year-olds and 65 year-olds and over. In return for increased funding, providers are expected to reduce their patient fees. The Ministry of Health has previously issued guidelines to the medical industry on compliance with the Commerce Act.

ENDS

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