What could repeal of the Health and Social Care Act 2012 mean for the application of competition law and the English NHS?

(By Mary Guy) In view of the significant opposition to the competition provisions of the Health and Social Care Act 2012 (HSCA 2012), it is unsurprising that several parties are explicitly proposing repeal in their 2015 UK election manifestos. Repeal of the HSCA 2012 appears to offer a neat shorthand for dis-applying competition law with regard to the English NHS. But how do the competition provisions of the HSCA 2012 relate to the application of competition law, and what would repealing them actually achieve? This blog post explores these two questions by specific reference to s.72 HSCA 2012, so “competition law” is defined as the anticompetitive agreements and abuse of dominance provisions.[1]

What the parties are proposing

  • The Liberal Democrats propose not only to repeal any parts of the HSCA 2012 which make NHS services vulnerable to forced privatisation through international agreements on free markets in goods and services, but also to end the role of the Competition and Markets Authority (CMA) in health, making it clear that the needs of patients, fairness and access always come ahead of competition.[2]
  • The Labour Party proposes to repeal the HSCA 2012, scrap the competition regime and restore proper democratic accountability for the NHS.[3]
  • The Green Party proposes to repeal the HSCA 2012 and introduce an NHS Reinstatement Bill to, inter alia, abolish competition and the purchaser-provider split and restore the obligation upon the government to provide a comprehensive health service.[4]

In contrast, any explicit reference to the HSCA 2012 is conspicuous by its absence in both the Conservatives’ and UKIP’s manifestos.

What does s.72 HSCA 2012 do?

S.72 HSCA 2012 provides that Monitor, the new sector regulator for healthcare, has concurrent powers with the CMA[5] to apply the provisions of UK and EU competition law.[6] Examples suggested by Monitor of where these rules have relevance include instances where providers agree not to compete for particular patients or services, and where a major hospital might only provide a certain service to GPs if a high proportion of patients are referred to it.[7]

It is to be noted that s.72 does not make competition law applicable as such. This is determined by the existence of an “undertaking”, defined as an “economic activity”[8] which involves “offering goods or services on a market”.[9] While there has been some doubt about whether the English NHS satisfies these requirements with regard to both providing and purchasing activities,[10] there is a growing consensus suggesting on balance that it does.[11] This view appears supported by New Labour reforms in establishing NHS Foundation Trusts with greater financial autonomy, and increased private sector involvement in providing NHS services.

Therefore s.72 merely defines the interaction between Monitor and the CMA regarding the enforcement of competition law. The relationship between the two agencies is based on “concurrent” powers whereby either may apply competition law – influenced by the model of other UK regulators. The experience of this arrangement in other sectors has suggested that regulators opt to use regulatory tools rather than their concurrent competition law powers. Obviously it remains to be seen whether this would be reflected in connection with the NHS, but it is certainly not inconceivable. Monitor has already considered its provider licence – which includes a specific “Choice and Competition” condition – not only as its new main tool for regulating providers of NHS services,[12] but also as alternative to its concurrent competition law function.[13]

While the lack of use of concurrent competition functions by certain regulators may be addressed to a certain extent by the Secretary of State’s new removal power under the Enterprise and Regulatory Reform Act 2013 (ERRA 2013),[14] Monitor is excluded from this. Consequently, either Monitor or the CMA remains competent to apply competition law, and provision exists for determining which is to act in a specific case.[15] However, Monitor’s position is strengthened in that it may only be directed to transfer cases to the CMA if these are not principally concerned with matters relating to the provision of healthcare services for the purposes of the NHS in England.[16]

A further dimension to the practical implementation of the concurrency arrangements between Monitor and the CMA results from concessions made in connection with the HSCA 2012. The original intention of the White Paper was for Monitor to have a duty to promote competition.[17] However, following the “listening exercise” conducted during the passage of the Health and Social Care Bill, the NHS Future Forum proposed, inter alia, the removal of this duty as a safeguard against the misuse of competition.[18] In addition, Monitor’s general duties under s.62 HSCA 2012 effectively require it to balance anticompetitive behaviour with patients’ interests,[19] which appears to give further effect to the NHS Future Forum’s proposal.

What emerges from the above is a picture of a competition regime which may – perversely – actually be more appealing to those sceptical about the role of competition in the English NHS than to those actively in favour of it. Certainly questions have been raised about Monitor’s ability to act as an effective co-competent competition authority in light of the combined HSCA 2012 and ERRA 2013 reforms.[20]

What would repeal of s.72 HSCA 2012 actually achieve?

Repeal may potentially have very different repercussions for two related, but distinct, aspects: the relationship between Monitor and the CMA, and the applicability of competition law.

With regard to the relationship between Monitor and the CMA, repeal may have a significant impact as the effect would presumably be to transfer competition law enforcement powers to the CMA. Indeed, such transfer has been recommended[21] as a response to Monitor’s perhaps ambivalent status. So repeal may conceivably pave the way for more active enforcement of NHS-related competition issues in light of the CMA’s commitment to promoting competition – potentially in contrast to the OFT’s previous apparent reluctance to pursue cases involving the NHS.[22]

As regards the actual applicability of competition law, repeal of the HSCA 2012 provisions appears to have little effect – as s.72 does not operate to initiate this. The Green Party’s proposal of an NHS Reinstatement Bill[23] and the Liberal Democrats’ proposal of removing the CMA’s role in health perhaps hint at one option for dis-applying competition law. This would involve establishing the English NHS effectively as a “non-economic” activity,[24] which apparently may only be achieved by a significant reversal of developments (including creation of Foundation Trusts) in the NHS of at least the past decade.[25] While this may theoretically be possible, the logistics of attempting this should not be underestimated.

Perhaps a more feasible option regarding the dis-application of competition law may be to explore what the EU law exception for Services of General Economic Interest (SGEI) can offer.[26] This was raised in debates preceding the HSCA 2012[27] and a recent Private Member’s Bill,[28] but a serious discussion has yet to be had. Clarifying the scope of the SGEI exception vis-à-vis the English NHS may well facilitate a more appropriate application of competition law. That – again perversely – may serve the interests of both those for and against competition in the English NHS.

[1] Other provisions of Chapter 2 HSCA 2012, such as sections 75 and 79 HSCA 2012 relate to functions in connection with merger control and procurement respectively and are beyond the scope of this post.

[2] Liberal Democrats, Manifesto 2015, “Stronger Economy. Fairer Society. Opportunity for Everyone”, p.73.

[3] The Labour Party, “Britain Can Be Better”, The Labour Party Manifesto 2015, p. 35.

[4] The Green Party, “For the Common Good – General Election Manifesto 2015”, p.31.

[5] A function consolidated by a duty on both agencies to cooperate under section 80 HSCA 2012.

[6] The Chapter I and II prohibitions of the Competition Act 1998 and Articles 101 and 102 of the Treaty on the Functioning of the European Union, respectively.

[7] Monitor, ‘Choice and Competition: hypothetical scenarios for NHS providers’, 12 September 2014.

[8] Case C-41/90 Klaus Höfner and Fritz Elser v Macrotron GmbH [1991] I-1979.

[9] Case C-35/96 Commission v Italy [1998] ECR I-3851.

[10] With doubt relating more to purchasing activities to support healthcare provision free at the point of delivery in light of Case C-205/03P Federación Española de Empresas de Tecnología Sanitaria (FENIN) v Commission.

[11] For discussion on this point, see O Odudu, ‘Are State-Owned Healthcare Providers that are funded by General Taxation Subject To Competition Law?’, ECLR 2011, 32(5), 231-241 and B Collins, ‘Procurement and Competition Rules – Can the NHS be exempted?’. The King’s Fund Briefing, March 2015. http://www.kingsfund.org.uk/publications/nhs-procurement-competition-rules.

[12] Monitor, ‘The NHS Provider Licence’, 14 February 2013. Foreword by David Bennett, Chairman and Chief Executive of Monitor.

[13] Monitor, ‘Guidance on application of the Competition Act 1998 in the healthcare sector: guidance for providers’, 12 September 2014.

[14] S.52, Enterprise and Regulatory Reform Act 2013 (ERRA 2013). For a discussion of this, and related reforms, see N Dunne, ‘Recasting Competition Concurrency under the Enterprise and Regulatory Reform Act 2013’. (2014) 77(2) MLR 254-276.

[15] See Regulation 4, the Competition Act 1998 (Concurrency) Regulations 2014.

[16] Regulation 8(1)(b), the Competition Act 1998 (Concurrency) Regulations 2014.

[17] Department of Health, “Equity and Excellence: Liberating the NHS”, page 5.

[18] NHS Future Forum, ‘Choice and Competition – Delivering Real Choice – A Report from the NHS Future Forum’. Page 9.

[19] Ss.62(1) and (3) HSCA 2012.

[20] For a critical view of both aspects, see A Sánchez Graells, ‘Monitor and the Competition and Markets Authority’. University of Leicester School of Law Research Paper No.14-32.

[21] Ibid.

[22] The most notable instance recently being its acceptance of voluntary commitments by NHS hospitals to desist from sharing commercially sensitive data about Private Patient Unit (PPU) prices. OFT Press Release, ‘ OFT welcomes action by NHS Trusts to ensure compliance with competition law’. http://webarchive.nationalarchives.gov.uk/20140402142426/http:/www.oft.gov.uk/news-and-updates/press/2012/71-12

[23] Possibly in continuation of the cross-party NHS Bill tabled by the Green MP Caroline Lucas and apparently suspended after a first vote with the end of the fixed-term parliament in March 2015.

[24] Or “Service of General Interest” in EU law terminology.

[25] See Collins (n11).

[26] A complex area of law which raises various questions about EU and Member State competence, particularly with regard to healthcare in view of Art. 168(7) TFEU.

[27] See T Powell: Health and Social Care Bill: Summary of Lords Committee and Report Stages. Standard Note: SN/SP/6252. 26 March 2012

[28] The NHS (Amended Duties and Powers) Bill tabled by the Labour MP Clive Efford and discontinued following a protracted discussion amongst Conservative MPs about the concept of solidarity at the Committee Stage in March 2015, having received a vote of 241 to 18 in favour of a second reading in November 2014 (http://www.publications.parliament.uk/pa/cm201415/cmhansrd/cm141121/debtext/141121-0002.htm).

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