Artificial Lower Limbs: A report on the supply of artificial
lower limbs in the United Kingdom
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Summary
On 9 December 1987 the Director General of Fair Trading asked
the
Commission to investigate a monopoly in the supply of artificial
lower limbs in the
United Kingdom.
We have found that InterMed Ltd (InterMed) with a market share
of over
70 per cent enjoyed a monopoly through its three subsidiaries,
J E Hanger & Co
Ltd (Hanger), Vessa Ltd and Robert Kellie & Son Ltd (Kellie).
Chas A Blatchford
& Sons Ltd (Blatchford), with a 26 per cent market share
also operated a
monopoly.
Virtually the whole of the industry's output is supplied to
the public sector.
Despite the apparent strength of the public sector purchasers
their market power
has been weakened by their proper concern to avoid the disruption
of services to
vulnerable patients.
Our inquiry began shortly after a relatively new public authority,
the
Disablement Services Authority (DSA), which came into existence
on 1 July 1987,
had started to take steps, including the introduction of new
tendering
arrangements, to restructure the industry in England. These
steps have still to be
completed.
The DSA had been created as a consequence of an earlier inquiry
under
Professor McColl's chairmanship. Its report had concluded
that changes were
urgently required to improve the quality of the service to
patients.
When our inquiry began organizational changes were also in
prospect in
Scotland and Wales; these too are still under way.
Our main conclusions were that InterMed had conducted its
business and
might be expected to conduct its business in a way which operates
against the
public interest; Blatchford, however, had not.
We found that:
(a) InterMed had obtained prices for and profits from its
supply of reference
goods which were higher than could be expected in circumstances
of normal
competition;
(b) InterMed had used its monopoly position to place unreasonable
pressure on
public sector purchasers, having regard to the nature of the
service, and had
been unco-operative with them; and
(c) in putting pressure on the public sector InterMed had
not given sufficient
regard for the interests of patients.
We recommend the following remedies:
(a) subject to a report to be requested of the DSA by the
Director General of
Fair Trading on the impact of the impending round of tendering
for
prosthetic services at certain Disablement Services Centres
(DCSs) on
InterMed's business, InterMed should be divided by the divestment
within
six months of 30 April 1989 either of Hanger or Vessa, which
in 1987 had
market shares of over 40 per cent and over 20 per cent respectively;
neither
company should be sold to the other monopolist (Blatchford);
(b) both before and after such divestment InterMed should
be required to
supply its reference products to any public sector purchaser
or contractor
on the same terms, conditions and prices as they were made
available to its
own prosthetists and technicians; and
(c) the Director General of Fair Trading should invite a further
report from the
DSA by 30 September 1990 on the progress made towards promoting
a
more competitive market. If the .progress achieved had been
insufficient the
Director General would consider further action including the
implementation of the divestment recommendation, if it had
been
postponed in the light of the first report by the DSA, and
the supply of cost
information by InterMed in order to monitor its levels of
prices and
profitability if this had not already been requested.
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