of such 'authorisation' for public buyers to engage in anti-competitive
procurement deserves some careful analysis. According to the
10.—(1) When commissioning health care services
for the purposes of the NHS, a relevant body must not engage in
anti-competitive behaviour [i.e. behaviour which would (or would be likely to)
prevent, restrict or distort competition], unless to do so is in the interests
of people who use health care services for the purposes of the NHS which may
(a) by the services being provided in an integrated
way (including with other health care services, health-related services, or
social care services); or
(b) by co-operation between the persons who
provide the services in order to improve the quality of the services.
(2) An arrangement for the provision of health
care services for the purposes of the NHS must not include any term or
condition restricting competition which is not necessary for the attainment of—
(a) intended outcomes which are beneficial for
people who use such services; or
(b) the objective referred to in regulation 2.
The Regulations place further requirements on
commissioners to ensure accountability and transparency in their expenditure.
In particular: [...] not to engage in anti-competitive behaviour unless to do
so is in the interest of patients. Regulation 10 makes clear that behaviour in
the interests of patients may include services being provided in an integrated
way or co-operation between providers in order to improve the quality of
services. This reflects the Government’s firm view that competition is a means
to improving services and not an end in itself.
then, it seems that under the new NHS public procurement rules, whatever is
considered in the 'interest of patients' can trump pro-competitive requirements
and allow the commissioning entity to engage in distortions of competition.
Even if Regulation 10(2) sets a clear proportionality requirement, my general
impression is that this is at odds with the general requirements of EU public
procurement law and, more specifically, with the principle of competition embedded in the
public procurement Directives--so that the application of Regulation 10(1)
for contracts covered by EU law (ie
when there is cross-border interest) may result in a breach of those
regard, the substantive
guidance published by the UK's healthcare sector regulator Monitor for public consultation is
particularly relevant. According to such draft substantive guidance, Monitor
will assess the appropriateness of engaging in anti-competitive behaviour on
the basis of a cost/benefit analysis. Indeed, it is explained that:
When will behaviour be anti-competitive and not in the interests of
users of health care services?
Where a commissioner’s conduct is in the
interests of patients its behaviour will not be inconsistent with the
prohibition on anti-competitive behaviour in Regulation 10.
In assessing whether or not anti-competitive
behaviour is in the interests of health care service users, Monitor will carry
out a cost/benefit analysis. Monitor will consider whether by preventing,
restricting or distorting competition behaviour gives rise to material adverse
effects (costs) for health care service users.
If we find that behaviour gives rise to
material costs, we will consider whether it also gives rise to benefits that
could not be achieved without the restriction on competition.
Monitor will then weigh the benefits and
costs against each other.
methodology for the carrying out of that cost/benefit (both clinical and
non-clinical) analysis is explained and, at the bottom line, when weighing
their relevance, Monitor will take into consideration that
is not a mathematical exercise, but rather a qualitative assessment. Relevant
benefits might outweigh costs when, for example, as a result of a
commissioner’s actions there is a reduction of competition between a small
number of providers, but a significant number of other providers of the
relevant services remain and the clinical benefits of the initiative are
significant and well evidenced.
Given the very
open-ended methodology described in the document and this final consideration,
my impression is that the analysis to be carried out by Monitor may err on the
side of allowing for an excessive amount of anti-competitive
behaviour--particularly in view of the potential relevance given to qualitative
(and, hence, difficult to measure, benefits).
However, such lenient
approach is not exactly matched when Monitor indicates the type of factors it
will take into consideration when assessing whether a commissioner has engaged
in disproportionate or unjustified anti-competitive behaviour, which include
examples such as whether the commissioner:
has limited the extent
to which providers are able to compete to attract patients to their services,
for example, by limiting the total number of patients a provider can treat or
the income a provider can earn, or by restricting the providers to whom a
provider can refer patients for further treatment, without objective
has restricted the
ability of providers to differentiate themselves to attract patients, such as,
for example, by imposing minimum waiting times that providers must adhere to or
restricting opening hours without objective justification; and
has reduced the
incentives on providers to compete, such as, for example, by disclosing
commercially sensitive information belonging to one provider to a different
provider without objective justification.
Therefore, it seems
that the substantive guidance is strict in terms of promoting (or not reducing)
competition of providers in their interface with patients, unless the cost
benefit/analysis indicates a (qualitative) advantage for patients that derives
from any restriction of competition--such as vertical or horizontal integration
of services, joint provision, or standardisation of conditions [as indicated by
After reading the
substantive guidance, it is not clear to me whether the structurally strict
approach of Regulation 10(2) will restrict the 'anti-competitive authorisation'
of Regulation 10(1) or, on the contrary, if Regulation 10(2) will also be
affected by the 'qualitative' approach of Regulation 10(1). In that regard, it
would be desirable for Monitor to make it clearer if it intends to use
Regulation 10(1) only exceptionally and in cases where the cost/benefit
analysis is clearly positive, or if it envisages a more lenient approach.
I would personally
favour the first option, since the authorisation of anti-competitive behaviour
in public procurement is prone to generate clear social losses derived from the
direct and knock-on effects that non-competitive public procurement generates
(see here and here),
whereas the (qualitative) benefits sought are hard to measure and to realise.
In any case, it will be interesting to see how the final guidance may be
affected by the current consultation period, which will be open until the 15th
of July 2013.