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Media
News release archive
2002
2002: March
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18/02
21 March 2002
INQUIRY INTO THE COMPLETED ACQUISITION BY COLOPLAST A/S OF SSL’S
CONTINENCE CARE BUSINESS
Statement of Issues
The Competition Commission has sent issues letters to
the main parties, Coloplast A/S and SSL, as part of its inquiry into the
completed acquisition of the Continence Care business of SSL by Coloplast.
Such letters are always sent to main parties in a merger
inquiry, before the Commission has reached any conclusion. They are designed
to highlight the matters which have been identified for further consideration.
This statement is being made public to give interested parties an opportunity
to bring to the Commission’s attention, in the next two weeks, any
further points they wish to see raised. The Commission has reached no
conclusions about whether any matters operate or may be expected to operate
against the public interest and will not do so until after it has discussed
these issues with the parties concerned.
Information provided to the Commission indicates that
following its acquisition of the continence care business of SSL, Coloplast
supplies a very large proportion of the incontinence sheaths, a substantial
proportion of urinary leg and night bags and a significant proportion
of intermittent catheters used in the UK. The principal issues that the
Commission intends to consider are:
Market definition
- Product Market
- Does the relevant product market include treatments for incontinence
such as surgery, physiotherapy, electrotherapy and drugs in addition
to continence care products?
- Within continence care, do absorbent products such as pads form part
of the same product market as products such as sheaths, catheters and
bags that drain urine away from the body?
- Are sheaths, intermittent catheters and urinary leg and night bags
part of a single product market or does each appliance constitute a
distinct economic market in its own right?
- In reaching its judgement the Commission will wish to examine evidence
on speed of product entry, the extent of switching between product types
and the degree to which the different products can be considered economic
substitutes, the significance of whether or not a product may be provided
on prescription, and the impact of the operation of the Drug Tariff.
b. Geographic Market
- Is the market European, given that many of the appliances are manufactured
in Continental Europe and distributed throughout Europe, or do the different
national reimbursement systems and differences in procurement practice
in individual European countries create a series of national markets?
- In reaching a judgement the Commission will wish to consider the extent
of price differentials between European countries, the scope for and
extent of parallel imports, and evidence on the role of prices and competitive
tendering in the market for the reference products.
Competition and market behaviour
- What are the distinctive features of competition between suppliers
of continence care products in the hospital and community markets in
the UK?
- How does the operation of the Drug Tariff affect competition in the
community sector?
- What linkages exist between the community and hospital sectors?
- What is the significance of trials to extend tendering to Primary
Care Trusts?
- In the light of the above, what are the potential consequences of
Coloplast’s acquisition of SSL’s continence care business
for prices and consumer choice in relation to the products in which
Coloplast now has a high or significant market share? In particular:
- Are there particular grounds for concern as regards the supply
of sheaths of which Coloplast now has a very high market share?
- To what extent will the operation of the Drug Tariff restrain
increases in the community sector while maintaining adequate supplies?
- To what extent are the UK Public Authorities or the National Health
Service in a position to exercise buyer power?
Marketing issues and barriers to entry
- What is the nature and extent of barriers to entry to the continence
care market?
- What factors are critical to a company’s ability to compete successfully
in the supply of such products in the UK?
- Do marketing practices prevalent within the industry such as the provision
of extensive free samples to hospitals raise barriers to entry?
- Are there particular advantages in offering a broad portfolio of products?
- Do companies offering a nursing service or acting as Dispensing Appliance
Contractors (DACs) derive significant advantages from so doing and,
if so, is the cost of establishing or acquiring a nursing service and/or
a DAC a barrier to entry by competitors?
- What are the barriers to becoming a DAC?
- To what extent is it possible for a DAC to generate business for itself
through the employment of specialist nurses who will encourage prescriptions
to be routed through the DAC?
- Does ownership of a DAC by an appliance manufacturer or supplier confer
extra leverage in the sale of that manufacturer’s or supplier’s
products to mail order patients?
- Do additional benefits to Coloplast arise from its ownership of, or
interest in, multiple DACs?
The role of Thackray nurses
- How is the value of Thackray nurses to Coloplast measured and how
is this affected by the mix of Coloplast and competitor continence care
products they recommend?
- To what extent will the Thackray nurses employed by Coloplast recommend
the continence care products of any supplier or will they be incentivised
to generate sales of Coloplast products to be supplied direct to patients
through Coloplast’s DACs?
- On what terms are Thackray nurses employed and remunerated and, if
they are to be independent, how is that independence to be monitored
and safeguarded? What degree of transparency will be possible?
- More generally, to what extent does sponsorship by suppliers of continence
care products of nursing and other NHS positions, and of conferences
and overseas visits, give rise to the risk that the sponsor’s products
will receive favoured treatment? Are existing safeguards adequate to
protect independent clinical judgement?
Cumulative effects
- In the light of the above, does Coloplast’s increased market
share in sheaths, bags and intermittent catheters, its ownership of
an increased number of DACs and its interest in others, and its acquisition
of the Thackray nursing service, either individually or in combination,
have the effect of reducing competition through its impact on other
or potential suppliers?
Other matters
- What, in the light of experience with other mergers in the continence
care field, is the likelihood that rationalisation of product lines
following the merger will lead to the withdrawal of individual products
and what would be the impact of this on users of those products?
- Will the merger bring benefits, for example in greater levels of expenditure
on R & D than would otherwise have been the case?
Possible remedies
The Commission has reached no conclusion as to whether the acquisition
operates or may be expected to operate against the public interest. However
it will need to consider whether, in the event of the Commission finding
that the acquisition was expected to operate against the public interest,
any requirement on Coloplast to divest itself of some or all of its brands
and other assets or behavioural undertakings on the part of Coloplast
would be appropriate to deal with the adverse effects identified.
Notes to Editors
1. The reference was made on14 January 2002 by the Secretary of State
for Trade and Industry under sections 64 and 69(2) of the Fair Trading
Act 1973 (see DTI News Release P/2002/017).
2. No conclusion will be reached about whether any matters operate or
may be expected to operate against the public interest until the Competition
Commission submits its report to the Secretary of State on 13 May 2002.
It will subsequently be published.
3.This inquiry is being undertaken by a group of five Commission members
and is led by Mr Arthur Pryor CB, former Head of Competition Policy at
the Department of Trade and Industry. The other members are Professor
John Baillie, a consultant accountant, Professor David Parker, Professor
of Business Economics and Strategy at the Aston Business School, Mr Stephen
Walzer, Assistant General Counsel (International Legal Affairs) at British
American Tobacco plc and Mr Alan Young, a director at the consultancy
firm of Webster Young Ltd.
4. Further information can be obtained from the Commission’s website
at www.competition-commission.org.uk/inquiries/coloplast.htm
5.Enquiries should be directed to Francis Royle, Press Officer on 020-7271-0242.
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