Competition Compliance Guidelines for the Private Healthcare Information Network ("PHIN")

Transcription

1 Competition Compliance Guidelines for the Private Healthcare Information Network ("PHIN") DAC Beachcroft LLP 100 Fetter Lane London EC4A 1BN Tel:(00 44) Fax: (00 44)

2 Competition Compliance Guidelines for PHIN Index Things to remember 5 Why have Competition Guidelines? 6 Q: Why should I bother about competition compliance? 6 Q: Can there also be personal penal and financial sanctions? 6 Q: Who should I contact if I have a competition query? 6 Competition rules in a nutshell 7 Q: What are the basic rules? 7 Q: What responsibilities does PHIN have? 7 Q: How should PHIN go about admitting/refusing new members? 7 Q: How should meetings and fora generally be chaired? 7 Q: What are the rules about chairing meetings with competitors? 8 Q: Should a legal representative be present at all PHIN meetings? If yes, who should be present? 9 Q: PHIN is an organisation that enables its members, who are competitors, to communicate with each other. What are the dangers of this for PHIN? Is there any information that members should not talk about using PHIN? 9 Q: What information can PHIN's members exchange if they are competitors? 10 Q: What is "aggregated" information? 11 Q: What is "historic" information? 11 Q: What is "genuinely public" information? 11 Annex 1 Collecting information from PHIN members: Compliance with competition rules 12 Annex 2 Basic house-keeping / Document management 14 Q: What is legal privilege? 14 Q: What can I do to ensure the legal privilege of documents? 14 Q: How should I manage legally privileged documents? 15 Q: To what extent can I be made responsible for oral/written communications? 15 Q: What should I do when filing / destroying documents? 16 Annex 3 Competition Compliance Statement 17 Annex 4 Competition Compliance Checklist for Chairs of meetings 18 These Competition Compliance Guidelines have been prepared for PHIN by DAC Beachcroft LLP. The law is up to date to March These guidelines only provide basic high-level guidance for circumstances where PHIN has not already taken advice on the application of competition rules, and specific legal advice should always be sought in cases of doubt. Much of the guidance is expressed as "Dos" and "Don'ts", but clearly there may be circumstances where specific advice obtained indicates that another approach may be acceptable from a competition perspective. 2

3 List of Tables Table 1 - DOs and DON'Ts of membership admission procedures 8 Table 2 - DOs and DON'Ts of chairing meetings 9 Table 3 - Information likely PERMITTED and likely NOT PERMITTED 11 Table 4 - EU Investigations What is/is not Legally Privileged 13 Table 5 - Document management The most important DOs and DON'Ts 14 Table 6 - Checklist of How to Watch your Language 14 Table 7 - DOs and DON'Ts for filing documents 15 3

4 Competition Compliance Guidelines for PHIN Preface PHIN takes its responsibilities to EU and UK competition law seriously. These guidelines are a risk management tool which aim to minimise the risks associated with competition law infringement. It is the responsibility of the Board and the members of PHIN, at all levels, to ensure that these guidelines are observed. The Board is determined that strict compliance with competition law is a requirement of the business. No Board member or PHIN employee has the authority to give any order or direction which conflicts with this policy. The following provides basic guidance on how to discharge responsibilities under EU and UK Competition rules. Clearly there are certain areas in which we have taken advice that may modify this guidance. I refer you in particular to Annexes 1 and 4 of this guidance. Chief Executive Officer Private Healthcare Information Network 4

5 Competition Compliance Guidelines for PHIN Things to remember 1. Make sure you comply with competition rules: the penalties for violation of them can be substantial. Individuals can go to jail and be personally liable to pay fines. Directors can be disqualified for up to 15 years. You could also be subject to private actions for damages in the Courts from third parties affected by an infringement of the law. 2. In a nutshell: do not enter into anti-competitive agreements, do not abuse your dominant market position and avoid communicating with your competitors about significant commercial terms where there is any doubt about whether such communications may infringe competition rules. 3. For the purposes of competition law, PHIN is a trade association. In principle therefore, and subject to the more detailed guidance on information exchange in this guidance, particularly in Annex 1, PHIN itself should not facilitate, orchestrate or suggest, and PHIN members should not engage in, discussions with (other) members (whether or not also involving customers or suppliers) about: Dividing up customers, territories or markets; Prices, pricing packages, discounts, profit margins, or costs; Other commercially sensitive terms and conditions with third parties; or Whether the commercial practices of other competitors are unethical or unfair. 4. Before holding any discussions between PHIN members, prepare a written agenda and, if this raises any competition concerns, have it checked by outside Legal Counsel. 5. During a meeting/call with members of PHIN, keep to the written agenda and ensure that no competition-sensitive issues are discussed, for instance under "any other business". 6. Always ensure that accurate minutes are taken of a call/meeting with PHIN members. 7. Stop the discussion immediately if you become concerned that any of it may constitute anti-competitive activity, express your concern clearly and have this minuted. 8. Report any problematic discussion to outside Legal Counsel immediately. 5

6 Why have Competition Guidelines? Competition Compliance Guidelines for PHIN Q: Why should I bother about competition compliance? 1. Both the European Commission ("Commission") and the Office of Fair Trading ("OFT") can impose fines of up to 10% of a firm's group worldwide turnover for the previous business year. Fines can be imposed where a firm intentionally or negligently infringes competition rules. Lack of knowledge of the relevant law is no defence; however, the existence of an adequate compliance programme may be a mitigating factor in determining the level of a fine. 2. The competition authorities, the Commission especially, have repeatedly imposed heavy fines on trade associations as well as their members for infringements. This underlines the risk that PHIN itself as well as its members may run in relation to competition law violations. Furthermore, in recent years the OFT and the Competition Commission (CC)in the UK, soon to be merged in the new Competition and Markets Authority, and the Commission in the EU have increasingly focused on competition law violations in the private healthcare sector. The ongoing Competition Commission inquiry into the market for private healthcare underlines the importance of this development, especially for PHIN members. In addition, the recently concluded OFT inquiry into the exchanges of potentially sensitive pricing information between NHS Hospitals' private patient units, further stresses the focus of the competition authorities on both the private and the public healthcare sector. 3. While PHIN itself may have a limited turnover, there is a danger that the OFT or the European Commission may try to lift the "associational veil" and use the turnover of member companies as a basis for the fine. Liability for payment would then also fall on the members. 4. There are also sanctions for disrupting an investigation. For example, disruption of an investigation conducted by the OFT can include an unlimited fine or a custodial sentence of 2 years. EU rules also apply robust fines of up to 1% of the total turnover of the undertaking in the preceding business year for disrupting a dawn raid. Q: Can there also be personal penal and financial sanctions? 5. Yes. In the UK this includes jail sentences of up to 5 years and/or personal fines on directors/senior executives of businesses accused of anti-competitive activity. An individual is personally guilty of anti-competitive behaviour if he/she has acted dishonestly in relation to the competition law infringement. Q: Who should I contact if I have a competition query? 6. For in-depth advice and to avoid sanctions for competition law infringement, please direct any queries to the Chief Executive Officer of PHIN, who will act as the Competition Compliance Coordinator ("CCC") for consideration in the first instance; and, if appropriate, refer to outside Legal Counsel for legal assistance. 6

7 Competition rules in a nutshell Q: What are the basic rules? 7. Both UK and EU competition laws prohibit agreements whose object or effect is anticompetitive and abuses of dominant positions. Q: What responsibilities does PHIN have? 8. As PHIN acts in the role of trade association, it must comply with the rules itself and ensure that its members do not breach them as a result of any decisions or recommendations that it makes to its members. 9. PHIN is responsible for any of its members activities where this is coordinated by itself before, during and after meetings organised or facilitated for its members. Q: How should PHIN go about admitting/refusing new members? 10. The following table provides guidance on how new members should be admitted to PHIN: Table 1: DOs and DON'Ts of membership admission procedures DO DON T Ensure that access to PHIN is defined by objective criteria which are applicable to all interested parties Establish criteria for membership of PHIN and how prospective members will be evaluated against these criteria Agree access terms which (in-) directly discriminate against potential new members, e.g. small companies Exclude other trade bodies and industry players from membership of PHIN without an objectively justified reason Keep an audit trail of changes to PHIN membership and all reasons for refusal/admission of new members Seek legal advice before rejecting an application for membership or removing an existing member Q: How should meetings and fora generally be chaired? 11. Remember that PHIN must not actively influence its members competitive behaviour and must ensure that its members comply with competition rules before, during and after attending meetings organised by PHIN. All PHIN members should be reminded of the Competition Compliance Statement (see Annex 4) before each meeting. The following table provides a checklist of DOs and DON'Ts before, during and after the 7

8 meetings. This checklist has been prepared for guidance purposes and is subject to the advice in Annex 1 and any other specific guidance which PHIN may obtain from time to time. Table 2: DOs and DON'Ts of chairing meetings DO DON T Refer to the competition compliance statement before meetings see Annex 4 Clear meeting agendas with the CCC prior to meetings Keep to the written agenda Seek legal advice in cases of doubt concerning any proposal to exchange new types of information between members that have not previously been approved from a competition law perspective Always make sure that meetings are accurately minuted Ensure that information that is legally privileged is kept separate from other documents during meetings and that their circulation is restricted. All copies must be returned to the CCC after meetings Note when third parties request to see papers/minutes of PHIN, when consent is given/not given and the reasons why Terminate a discussion and stop the meeting if you consider that competition rules are being infringed. Ensure that a minute is kept of this action Take any decisions that would impact on members competitive behaviour, such as pricing policy, market sharing etc except where legal advice has been taken. Influence members business decisions PHIN itself is fully responsible if it recommends anti-competitive actions Allow for any discussion relating to commercially sensitive topics (e.g. related to price, market sharing/customer sharing, bid-rigging, fixing terms and conditions of sale/services etc) Disclose commercially sensitive information Use power/domination/guilty vocabulary (either in writing/orally) such as: We will dominate the market/eliminate competitors or please destroy/delete after reading Give the impression that the source of any pricing information, other than that referred to in Annex 1 or approved from a competition law perspective, comes from talks held at PHIN clearly state the source of any pricing information Q: What are the rules about chairing meetings with competitors? 12. PHIN members will participate in discussion fora, the purpose of which will variously include reviewing the gathering of inputs into, and the quality and completeness of, data sets, and discussing and advising PHIN on the direction of development of the data sets, including measures for publication. If you wish to participate in a meeting of a trade association like PHIN, you must principally not communicate with competitors about the following topics that should, subject to the advice in Annex 1 and any further specific advice received by PHIN, be assumed to be prohibited topics: Prices, pricing plans, profits, profit margins, or costs; Customers, territories, production or marketing plans; Terms or conditions of sale, including credit terms; 8

9 Dividing up customers, territories, or markets; or Decisions to bid or not bid, quote or not quote prices. Please see, however, the information provided below for further guidance. 13. Information sharing between competitors can also be problematic if it relates to information that is commercially sensitive such as general business strategy, product composition, conditions of sale, invoices, prices etc, although exchanges of such information can sometimes be justified from a competition perspective. 14. Also, avoid any private meetings with competitors that may appear to be improper. If the conversation ever turns to any of the "prohibited" topics, stop the conversation, advise the participants that the topic may violate competition law and bring the meeting to an end. Competition rules apply to social gatherings just as much as to formal meetings! Q: Should a legal representative be present at all PHIN meetings? If yes, who should be present? 15. We recommend that an assessment is made before each meeting and that, in the case of doubt, the CCC consults with external lawyers. Please note that most competition law infringements take place after the official agenda has been finished, so if a legal representative is present, he should be present for the entire duration of the meeting. 16. A legal representative may either be a solicitor acting for PHIN, one of the member companies, or outside Legal Counsel. Q: PHIN is an organisation that enables its members, who are competitors, to communicate with each other. What are the dangers of this for PHIN? Is there any information that members should not talk about using PHIN? 17. The main danger is that PHIN's members may directly or indirectly exchange sensitive information, using PHIN as an intermediary or facilitator. This may, for instance, happen in the context of meetings organised by PHIN, as described above, but also where one member submits sensitive information to PHIN with the intention that PHIN relays this to another member. Depending on the nature of the information flow, the OFT or European Commission can decide that PHIN itself, as well as its members have broken competition law and impose a fine or other measures. 18. Decisions made by PHIN may fall under UK or EU competition legislation, as it is either an undertaking in its own right or an "association of undertakings". In practice, this means that PHIN is neither allowed to assist in the conclusion and implementation of agreements that disregard competition rules nor make any recommendations to its members that lead to a restriction of competition law. In particular, any recommendation to align pricing arrangements would be strictly prohibited. The members themselves are not permitted to communicate with their competitors the information suggested above. 9

10 Q: What information can PHIN's members exchange if they are competitors? 19. Note that while it is usually the members that exchange the information with each other, PHIN may still be held responsible for facilitating anti-competitive discussions, as described above. This is why it is essential that PHIN, too, has a thorough understanding about what information can and cannot be exchanged between its members. 20. Competition authorities accept that, in principle, communication between competitors is a normal and harmless part of conducting business, which can have procompetitive effects. There are, however, limits on what can be discussed between competitors. 21. Under UK and EU competition law it is strictly prohibited to discuss future prices or quantities. This will be considered a restriction of competition by object and will constitute the most severe infraction of competition law. In the case of objectinfringements, the competition authorities will not be obliged to show that you rely on the exchanged information. Please also note that merely receiving such information will be enough to constitute an anti-competitive agreement, unless it is immediately and explicitly opposed. 22. Exchanging information that does not deal with future pricing or quantities may still constitute an infringement of competition law, although the risk is lower. The authorities may suspect that the information exchange has had the effect of breaching competition law. In such cases, the market situation and the type of information exchanged with your competitor will be decisive. 23. There is not one dominant factor that will decide whether the exchange of nonpricing/quantity information is permitted and a lot will depend on the exact details of the case. Again, it is very important that you seek legal advice from outside Legal Counsel if you have any questions or concerns. The following Table 3 will give some guidance as to what is generally permitted and is likely to not be permitted as the information exchange may have the effect of infringing competition law. Annex 1 contains specific advice on likely effects of the exchange of certain types of information between PHIN and its members. Table 3: Information likely PERMITTED and likely NOT PERMITTED Likely PERMITTED Likely NOT PERMITTED Exchanging information that is not strategic or does not reduce uncertainty in the market Exchanging data that is "aggregated" (see below) Exchanging "historic" information (see below) Data that is "genuinely public"(see below) Exchanging information that is strategic in nature (i.e. prices, quantities, sales & marketing plans), subject to the advice in Annex 1 Exchanging information that is individualised (e.g. very specific sales data) Exchanging non-historic/current or future data (e.g. information about current contracts) Data that is purely private/confidential (e.g. internal business plans) 10

11 Q: What is "aggregated" information? 24. Any information exchanged should generally be in summary or aggregated form, so that accurate figures for individual transactions or businesses are not available. This means that data may either be collated according to groups of businesses or else based on multiple transactions. Whether or not the information is sufficiently aggregated will depend upon the number of businesses which are active in the market in which the information exchange takes place. It is important that no company should be able to obtain detailed information about a competitor's business, not otherwise available to it, by "reverse engineering" the statistics. 25. There are, however, exchanges where this may be too broad a generalisation, including those detailed in Annex 1. Q: What is "historic" information? 26. There is no pre-determined threshold that decides when information becomes "historic". Rather, this will depend on the nature of the market and the competitive interaction in it. Competition authorities have indicated that information is "historic" where it is several times older than the average duration of a contract in the industry in question. 27. If, for example, contracts are renewed on an annual basis it is permitted to exchange information in relation to a contract signed two years before. Equally, if contracts are renewed every six months, then exchanging information about a contract signed a year before will be permitted. If, however, in relation to the latter example, information is provided to a competitor that is less than six months old, the data will not be historic and, accordingly, the exchange might be anti-competitive. Q: What is "genuinely public" information? 28. If the information PHIN members exchange with their competitors, either directly or indirectly, is "genuinely public", there will generally not be a breach of competition law. The information must, however, be equally accessible, in terms of costs of access, to all competitors but also to customers. For information to be "genuinely public", obtaining it should not be more costly for customers and outside companies than it is for you. For this reason, competitors would normally not choose to exchange data that they can collect from the market at equal ease, and hence in practice exchanges of genuinely public data are unlikely. 29. Please note that even if the information you exchange is what is often referred to as being "in the public domain", it is not "genuinely public" if the costs involved in collecting the data deter other companies and customers from doing so. 30. In the interests of reassurance: even if information is exchanged, either directly or indirectly via PHIN, that is "in the public domain", rather than "genuinely public", and this does not refer to future prices or quantities, PHIN members are still less likely to have breached competition law than when private information is exchanged. 11

12 Annex 1 Collecting information from PHIN members: Compliance with competition rules 1. PHIN has been established to collate data and publish meaningful information and comparative indicators to assist patients in making informed choices in relation to private and independent hospital care. 2. To this end, and with a view to responding to the concerns that have been expressed by the Competition Commission in its Issues Statement and Annotated Issues Statement in connection with its ongoing market investigation into the provision of private healthcare in England, PHIN has aimed to: (1) help harmonise information about treatment packages provided by its members to assist comparison between different offers, which will necessitate the sharing of non-price information about such packages between PHIN and its members; and (2) gather and publish information regarding the number of times particular self-pay procedures have been carried out by PHIN members, which may necessitate the sharing of certain information about individual hospital activity levels prior to publication. 3. In relation to (1) (harmonisation of treatment packages), PHIN will not publish pricing information, but rather has helped to facilitate a process by which private hospital operators will each publish their own prices in a consistent and comparable format. 4. In this context, it has been agreed to break down the care pathway for each patient into the following broad and easily understandable elements: (a) First consultation (outpatient) appointment; (b) Diagnostics and preparatory investigations and treatment; (c) Index event (main treatment); and (d) Follow-up treatment and review. 5. The presentation by each PHIN member of pricing information in this harmonised way, using consistent codes and treatment packages, and in particular ensuring that each member makes this information available to the patient at the same point in relation to each stage of treatment, will enable patients to (a) compare hospitals; and (b) decide which hospital offers the best price for the treatment in question. 6. The above harmonisation process requires exchanges of non-pricing information between the members of PHIN, which are generally considered to have a lower risk from a competition law perspective than exchanges of pricing information. The competition authorities will, in particular, not find that the exchange of related information constitutes a breach of competition rules per se, but will instead look at the long-term effect of such exchanges. 7. Competition authorities recognise that information exchanges may have very beneficial effects for competition and acknowledge that this is especially the case where it leads customers to make a more informed choice. PHIN has been set up to enable patients to make more informed choices about their private and independent healthcare treatment, and has indeed engaged with the competition authorities in the UK with a view to developing dialogue on how such choice can be facilitated. The desirability of informed choice has also been flagged by the competition authorities in their initial findings pursuant to their investigation of the provision of private healthcare in England. This means that it can be expected that the competition authorities will look upon this type of information exchange favourably. 8. In relation to (2) (gathering and publishing information that shows how often private hospitals carry out a certain procedure), such information exchanges will 12

13 equally not constitute a breach of competition rules per se, as the exchange of this kind of information does not relate to strategic future pricing or quantities but comprises information about procedures that have taken place in the past. 9. As in relation to (1), the competition authorities will therefore focus on the effects of such information exchanges. In this context, it is to be expected that they will, again, take into account that the aim is to allow patients to make informed choices in a way that will address some of the stated concerns of the competition authorities with regard to the private healthcare market in England. The fact that members cannot exert any meaningful control over the number of operations they carry out also means that any information exchanged regarding the quantity of procedures that have been carried out is unlikely to constitute an infringement of competition law. 13

14 Annex 2 Basic house-keeping / Document management Q: What is legal privilege? 1. Documents that are legally privileged do not have to be given to investigators during competition investigations. 2. Legal privilege protects advice provided by PHIN's legal advisers and material prepared for the purpose of pending or contemplated litigation. Privilege also extends to written communication from PHIN to its legal advisers, requesting legal advice and as such should be marked Legally Privileged Confidential Communication to outside Legal Counsel. 3. Under UK rules, legal privilege also applies to advice from PHIN s in-house lawyers as well as external lawyers. In EU investigations it only applies to advice from external lawyers qualified to practise in the EU. 4. Legal privilege does not extend to file notes prepared by in-house lawyers, employees or members of legal advice provided by outside Legal Counsel. The only exception to this is where the note records advice received from external lawyers word for word, and no comment or amendment has been made to the advice. Table 4: EU Investigations What is/is not Legally Privileged Legally Privileged Not Legally Privileged Correspondence between PHIN and its external lawyers Internal reports of advice from external lawyers if reporting the text/content of communications from external lawyers in writing Internal reports of advice received from external lawyers if expressing an opinion/or which amends the external lawyers advice File notes prepared by an in-house lawyer/staff of PHIN/a member File notes which record advice from external lawyers where no comment or addition is made to the advice Q: What can I do to ensure the legal privilege of documents? 5. Any document generated by PHIN to its external lawyers should be marked Legally privileged Confidential Communication to outside Legal Counsel. 6. Notes should not be taken of advice from external lawyers. Oral advice received from external lawyers should not be communicated in writing to third parties. Third parties should be invited to a meeting, copies of the document should be handed out for guidance and copies should be returned at the end of the meeting. 14

15 Q: How should I manage legally privileged documents? 7. The following table provides basic guidance: Table 5: Document management The most important DOs and DON'Ts DO DON T Keep documents for a maximum period of 6 years or in accordance with PHIN s document retention policy Log all queries to the CCC, even if not referred to outside Legal Counsel for specific legal advice Selectively destroy documents once an investigation/court action has started Circulate legally privileged material. Invite third parties to a meeting, hand out copies of the advice, take back all copies at the end of the meeting. Keep legally privileged material (soft/paper copies) separate in files marked legally privileged Q: To what extent can I be made responsible for oral/written communications? 8. Take care with your language in all business communications, whether in writing or in the course of telephone conversations or meetings. Careless language can be very damaging if PHIN or any of its members are investigated for competition infringement. 9. A poor choice of words can make a perfectly legal activity look suspect. Here is a checklist of what you can and can t do. Table 6: Checklist of How to Watch your Language DO DON T Remember that, when you write something down, it could be made public one day Consider if you need to write it down at all (including rough notes), your written reports don t benefit from privilege Speak to the CCC before committing sensitive discussions to paper Use guilty vocabulary ( Please destroy/delete after reading ) Question whether an activity is legal or illegal in correspondence other than to outside Legal Counsel Use power or domination vocabulary ( We will dominate the market, We will eliminate our competitors ) Clearly state the source of any pricing information (so it does not give the false impression that it came from talks at a meeting of PHIN) 15

16 Q: What should I do when filing / destroying documents? 10. Rules for the retention and routine destruction of corporate records must be objectively defined. The following are some Guidelines: Table 7: DOs and DON'Ts for filing documents DO DON T Keep documents for a maximum period of 6 years or in accordance with PHIN's document retention policy Avoid keeping several different versions of the same document in your files/computer systems Keep papers for longer than PHIN s document retention policy Write notes of advice received from external lawyers this may not be legally privileged Keep accurate notes of all meetings Ask outside Legal Counsel to confirm legal advice in writing (file/store this advice in a separate paper marked Legal Privilege/Strictly Confidential ) 16

17 Annex 3 Competition Compliance Statement I have read and understood the Competition Compliance Guidelines of PHIN. I understand that all staff of PHIN and its members must observe these guidelines and that breach of these will lead to disciplinary action. I understand that I may be personally liable for breach of the rules and may be liable to fines and criminal sanctions. PRINT NAME Signature Date [To return to PHIN Competition Compliance Coordinator] 17

18 Annex 4 Competition Compliance Checklist for Chairs of meetings To be referred to by chairs of meetings prior to meetings for the benefit of all participants 1. All meetings of PHIN must comply with applicable competition rules. 2. PHIN and its members need to ensure they do not enter into agreements whose object or effect is restrictive of competition and do not abuse any dominant position. 3. The following is non-exhaustive guidance that applies to formal/informal meetings organised by PHIN. PHIN and its members: Will stick to meeting agendas; Will not exchange competitively sensitive information - including prices, costs or terms and conditions of business unless PHIN has obtained specific advice to ensure that such exchanges will not infringe competition rules. If this condition is breached, the chair MUST immediately draw the meeting to a close and minute this action; Will not discuss (formally/informally) price fixing, exclusion of third parties or market sharing; Will ensure that any exchanges of information regarding individual hospital activity data or pricing structures reflect the previous advice that has been circulated by PHIN on what is or is not appropriate; Ensure that access to PHIN membership is fair, reasonable and nondiscriminatory; Will take care of any notes taken at meetings since these are not legally privileged and may be made public one day; and Will consult with outside Legal Counsel if in doubt about competition compliance. 4. PHIN and its members note that infringement of competition rules can result in corporate fines of up to 10% of worldwide turnover, personal fines and penal sanctions. 18