The importance of being compliant

On 1 April 2014, the Competition and Markets Authority (CMA) became the UK’s key regulator for competition law as the unified successor of the Office for Fair Trading and the Competition Commission. Its Chief Executive, Alex Chisholm, sent a clear message that the CMA is focussing on nurturing a culture of compliance as its new regulatory strategy.

Additionally, the CMA has identified ‘NHS mergers’ as the hot topic for 2014. The Health and Social Care Act 2012 has made clear the application of competition law to the NHS. As a result of that Act, NHS organisations at every level and in their every interaction with patients, suppliers, competitors and regulators must now comply with competition law.

This article focuses on compliance of competition rules by Foundation Trusts (FTs) and NHS Trusts. An effective compliance strategy enables an organisation to minimise the risk of competition law infringements, and the costs resulting from anti-competitive behaviour.

What is compliance?

In 2012, the European Commission published guidance on compliance with competition law. It identified the three main features of compliance:

a) Organisations have freedom to decide how they wish to comply with competition law. There are no prescribed rules

b) The benefits of an active and supportive compliance programme boost staff morale and enhance the organisation’s reputation

c) Compliance with competition law reduces risk of breaches and fines.

In essence, the Commission advocates a credible internal compliance programme that is supported by the organisation’s management and its leaders in order to establish an effective compliance culture.

NHS regulators

As the concurrent healthcare regulator with the CMA, Monitor has the power to enforce competition law against FTs. It also has separate powers to enforce the competition conditions in FTs’ Provider Licence.

NHS Trusts operating under the auspices of the NHS Trust Development Authority (TDA) must also abide by competition law principles. Although NHS Trusts are exempt from the requirements to hold a licence, in order to ensure fairness and coherence across the sector, the TDA requires them to comply with the choice and competition conditions in the Provider Licence.

Strands of competition law

The first step to compliance is for all Trusts to improve their understanding of competition law to help them to shape their long term strategy and ensure that competing Trusts are not breaching competition law to another Trust’s commercial disadvantage.

In order to understand compliance with competition law, it is necessary to distinguish between the rules governing merger control[1] and behavioural competition law[2].

Compliance with merger control regime

The NHS is perhaps more familiar with the merger control regime as a result of high profile merger cases such as Bournemouth/Poole[3] and Frimley Park/Wexham[4].Compliance with the merger control regime usually means that the parties to a proposed transaction need to undertake self assessment to determine whether it triggers the jurisdictional threshold for CMA clearance and to cooperate with the authorities in a helpful and timely fashion during the merger notification and investigation processes.

Compliance with behavioural competition law

Under the CA98, Trusts must not engage in anti-competitive behaviours. The two types of anti-competitive behaviours are:

(a) Participating in anti-competitive agreements, decisions or concerted practices, such as market sharing or bid rigging

(b) Engaging in a conduct which amounts to an abuse of a dominant position in a market, for example, limiting or restricting supply or innovation of healthcare to the prejudice of patients.

The mostly likely scenarios where a Trust may fall foul of competition rules include sharing sensitive information during a collaboration with other Trusts and agreeing to share the market during tenders for commissioner contracts.

It is imperative for NHS providers to understand and be demonstrably compliant with competition law in its day-to-day activities and interaction with competitors rather than just during major transactions.

Often, breaches of competition law are discovered by the CMA either through whistleblowers, third party complaints or its own market intelligence. It is likely that Monitor is working closely with the CMA to gather information and is supporting the CMA in its investigations. The CMA has been given stronger investigative powers than its predecessors and has made clear that it intends to increase the use of these investigative powers to uncover harmful practices.

The risk of non compliance for a Trust is potentially catastrophic: Monitor may levy financial penalties of up to 10% of a Trust’s annual turnover and directors engaging in the most serious forms of anti-competitive practices may face civil and criminal charges. The CMA has been vocal in its intention to increase the use of penalties such as competition (director) disqualification orders to deter anti-competitive behaviour.

Practical steps Trusts can take to be competition law compliant

A compliant approach needs to be embedded in an organisation from the top down. Management and leaders must set an example to the team that competition law simply has to be accepted as part of the overall risk management, legal obligations and licence condition compliance.

This can be achieved by having a comprehensive and structured compliance training programme for the Board and decision markers. It is noted that the CMA has previously reduced penalties for organisations where they can demonstrate that active steps have been taken to comply with competition law, although it does not absolve an organisation from its breach.


The next steps

Compliance with competition law is business critical. Breaches of competition law attract serious consequences stretching beyond a Trust’s balance sheet. The CMA’s emphasis on cultivating a competition law compliant society is as relevant to NHS providers as they are to multinational conglomerations. Trusts must take note of this.

Trusts are advised to take active steps to educate their members of competition law rules and implement an effective compliance programme both to demonstrate compliance to regulators and to avoid breaching competition law.

Hempsons has developed a comprehensive competition compliance programme and toolkit to help the NHS to be competition law compliant. Contact Victoria Yuan or Lindsay Draffan below for more information.


Click here to read our articles on: the Jackson Reforms one year on, hospital chains, persistent litigants, CCG governance, Monitor’s latest procurement guidance, saying sorry for mistakes and the future of the stethoscope.

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[1] The UK merger control rules are found in the Enterprise Act 2002

[2] These stem from the Treaty on the Functioning of the EU and implemented by the Competition Act 1998 (CA98) in the UK.

[3] The Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust and Poole Hospital NHS Foundation Trust

[4] Heatherwood and Wexham Park Hospitals NHS Foundation Trust / Frimley Park Hospital NHS Foundation Trust