Southern Community Laboratories cleared to acquire Medlab

The Commerce Commission has granted clearance for Southern Community Laboratories Limited (SCL) to acquire 100% of the shares in Medlab South Limited from Sonic Healthcare (New Zealand) Limited.

The proposed acquisition would result in the transfer to SCL of Medlab South’s contracts with the Nelson/Marlborough and South Canterbury DHBs to provide pathology testing services. The Commission concluded the proposed acquisition would not change competition in the relevant markets during the term of the current contracts with those DHBs.

The Commission also considered whether the acquisition would affect markets for contracts for pathology testing that will be let by various South Island District Health Boards between 2015 and 2017. These contracts are likely to include any combination of the South Canterbury, Southern and Nelson/Marlborough DHB contracts. The Commission also considered the effect in the national market for the provision of cervical screening tests.

“We concluded that the acquisition is unlikely to reduce the ability of Sonic, or any other pathology provider, to compete for the contracts when they are next offered for tender,” said Commerce Commission Deputy Chair Sue Begg.

The Commission is, therefore, satisfied that the proposed acquisition will not be likely to substantially lessen competition in the affected markets.

The Commission is also satisfied that the proposed acquisition will not be likely to substantially lessen competition in the national market for the provision of cervical screening tests.

A public version of the written reasons for the decision will be available soon on the Commission‘s website at www.comcom.govt.nz/clearances-register

Background
Southern Community Laboratories (SCL) forms part of the Healthscope group of companies, which is a provider of pathology services in Australia, New Zealand and South East Asia. SCL, and related companies in the Healthscope group, are currently contracted to provide pathology services to six DHBs. SCL also provides cervical screening tests for the National Screening Unit (NSU), a unit of the Ministry of Health.

Medlab South forms part of the Sonic Healthcare group of companies, an Australian-listed company, which provides pathology and radiology services in Australia, Europe, the USA and New Zealand. Sonic, through Medlab South and related companies, is contracted to provide pathology services for eight DHBs. Sonic also provide cervical screening tests for the NSU.

Assessing an application for a merger or acquisition
When considering a proposed merger, the Commission must decide whether the competition that is lost in a market when two businesses merge is substantial. We will give clearance to a proposed merger only if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market.

A fact sheet explaining how the Commission assesses a merger application is available for download at http://www.comcom.govt.nz/mergers-and-acquisitions-merger-assessment-fact-sheet/

ENDS

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