In the March 2003 issue of our Competition Law Bulletin, we summarised the judgment of the Competition Commission Appeal Tribunal to the effect that the North and West Belfast Health and Social Services Trust (“the N&W Health Trust”) was an undertaking for competition law purposes. The Tribunal therefore concluded that the OFT had been wrong to reject the complaint by Bettercare, a provider of nursing care services and accommodation, that the N&W Health Trust had abused a dominant position by offering unfairly low prices and unfair terms for the procurement of such services and accommodation. The Tribunal stated as a matter of general principle that the imposition of unfairly low prices in procurement situations can have an adverse impact on competition.

The OFT gave its decision on the substance of the complaint on 18 December 2003. With regard to the preliminary question of whether the N&W Health Trust is an undertaking for Competition Law purposes, the OFT observed that a final finding as to whether or not the Trust is acting as an undertaking should await the outcome of further pending cases in the European Court of Justice (“ECJ”). In March 2003, after the date of the Competition Commission Appeal Tribunal judgement, the European Court of First Instance (“ECFI”) gave its judgment, in March 2003, in the FENIN, Case T-319/99, FENIN v European Commission, which is currently under appeal before the full ECJ. A further case, Joined Cases C-264, 306, 354 and 355/01, AOK, is also pending before the ECJ, and both cases are relevant to the issue of whether purchasing by a public body is an economic activity. Based on the judgement of the ECFI in the FENIN, it is possible that these cases could point towards a different conclusion subsequently being reached on the question of whether the N&W Health Trust is an undertaking, to that reached by the Competition Commission Appeal Tribunal. However, the OFT decided the present case on the question of whether or not there was an abuse of dominance, leaving open the question of whether the N&W Health Trust is an undertaking.

The OFT found that the N&W Health Trust does not set the prices paid to Bettercare for residential and nursing home care, and that it also does not determine the funding for its own residential homes. Based on the fact that the N&W Health Trust does not itself set its prices, the OFT concluded that it could not be committing an abuse by means of the alleged low or discriminatory prices. Further, the relevant rates are set by the other public bodies, the Eastern Health and Social Services Board and the Department of Health, which do not carry out economic activities and so are not undertakings for competition law purposes.

More generally, the OFT stated that charging excessively low purchase prices could constitute an abuse of dominant position, but this would only be likely to be abusive in exceptional circumstances. The OFT considered that excessively low purchase prices will normally be self-correcting, in the absence of barriers to exit by suppliers from the relevant market. (Where there are no barriers to exit, a monopolist purchaser paying excessively low prices would be unable to obtain supply beyond the short-term.) The OFT did not believe that there were any exceptional circumstances in the present case.

Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.