Competition law issues for the professions



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COMPETITION LAW ISSUES FOR THE PROFESSIONS

Professional men, they have no cares:



Whatever happens, they get their’s”1

Justice John Mansfield

Federal Court of Australia

INTRODUCTION

The word “profession” is relevantly defined in the Oxford Dictionary as “A vocation, a calling, esp. one requiring advanced knowledge or training in some branch of learning or science, spec. law, theology or medicine”, or more widely “any occupation as a means of earning a living”.2

For present purposes, those definitions are too generic. What is it about the occupation of a lawyer or a doctor (or a theologian – although I do not propose to further refer to theologians) that distinguishes it from that of a plumber or an electrician? Or, for that matter, a butcher, a baker or a candlestick maker?
To many of us, the answer is intuitive, like the answer to the question of when does day become night: it is hard to explain but I know when it is day and I know when it is night. I know the difference. Behind the intuition lies a complex understanding of the existence of a set of conditions. Some describe the difference in terms of the way the particular occupation is controlled, perceiving a clear difference between the degree of regulation imposed either by statute or by the professional body (controlling such things as competition between professionals, fee regulation, advertising or association restrictions and the like), and the degree of regulation imposed on other businesses3. For reasons which are apparent, that is not for New Zealand and Australia a currently applicable distinction. In an interesting article entitled “Theory and the Professions”4, Professor Friedson, a sociologist, endeavours to identify the essence, or the essentials, of a profession. He specifies two “key ideas” commonly used:

A paper presented to the Nineteenth Annual Workshop of the Competition Law and Policy Institute of New Zealand, 3 August 2008. I acknowledge the considerable assistance in the research for this paper of Carmen Labbozzetta, Legal Researcher, Federal Court of Australia






  1. the members of a profession are dedicated to public service, rather than only to their own economic interest like other occupations; and




  1. the members of a profession have a special kind of education, knowledge and skill.

But he looks behind those ideas to seek a systematic elaboration of the conditions in which those key ideas can exist. The common feature of the professions, he opined, is firstly that they are occupations whose members control recruitment, training and the work they do. And secondly it is work different from the crafts because it requires formal organisation, and theoretical or abstract knowledge for its adequate performance, and generally the exercise of discretionary judgment.


As in a number of sources to which I had regard in preparing this paper, the thesis may reflect more the American experience than the current New Zealand and Australian reality, because Professor Friedson postulates the need for “some consequential form of labour market control by the occupation”5, before then considering whether the cessions of that control to the profession is in the public interest having regard to the quality of the work done and the degree of altruism demonstrated by the members of the professions. That analysis may be reflected in, and refined by, Professor Hatfield, as her paper reveals that the American Bar Association has had, and continues to have, a pervasive influence over regulation of the market for the provision of legal services in the United States6.
I shall later refer to certain other features of Professor Hartfield’s paper.
I should briefly refer to some economists’ analysis. Apparently economics has no theory of the professions as distinct or relevantly different economic entities, although there is much literature discussing individual professions such as law or medicine.7 It has been said that economists tend to model each profession differently.8 Professions operate in markets and market forces determine outcomes although professional markets are said to have a high level of regulation or restriction which affects competition.9
The economic focus in literature is on behaviours within professional markets.10 Generally, economists are said to make the implicit assumption that professions are ordinary neoclassical firms assessed by applicable standards.11 This may be referred to as “neo-classical production theory”, where “factors of production” are basic units of analysis and professions are “knowledge-reliant production organisations” operating in networks. Professionals are said to operate autonomously (and competitively) but are dependant on their professional network for maintenance and development, including to develop their core competencies, which earns them “rents”12. Reputation of professionals can operate as a quality indicator for consumers and as a mechanism for peer-review within the network.13
According to Savage, the major shortcoming of conventional economic approaches to understanding professions is they analyse “demand-side questions” or the impact on the consumer, with the implication that the existence of professions is prima facie evidence of market failure.14
There is no need for too theoretical an analysis of what constitutes a profession for the purposes of this paper. I shall take the definition, also adopted by the Australian Competition and Consumer Commission (ACCC) from the Australian Council of Professions. It states that a profession is:
… a disciplined group of individuals who adhere to high ethical standards and uphold themselves out as, and are accepted by, the public as possessing special knowledge and skills in a widely recognised, organised body of learning derived from education and training at a high level, and who are prepared to exercise this knowledge and these skills in the interests of others.15 
Some would stress that element of the definition which conveys responsibility for the welfare, health and safety of the community as taking precedence over other considerations.16
The medical profession has emphasised that ethical commitment in support of its argument that it should not be subject to competition regulation.17 The courts in Australia and New Zealand have not been persuaded that the ethical commitment represents a point of distinction so significant as to justify exempting the professions from the laws promoting competition18, in line with Lord Denning’s early statement that:
[if professionals] make a rule which is in restraint of trade, they are as much subject to the law of the land as anyone else… The professions have no exemption….19
Professor Fels alluded to the penumbra between night and day, or between professionals and other occupations when he said that “…perhaps estate agents and other categories which shade into skilled occupations….” are to be embraced in our accepted definition of a profession.20
A consequence of being a profession is the economic rationale for regulation of professions as including the limitations on information on professional services available to consumers, the possibility that transactions may be open to misrepresentation and abuse of trust (‘non-voluntary’), and the existence of important distributional concerns.21
For present purposes, it is sufficient to use the term “professions” to encompass a range of occupations including accounting, architecture, law, medicine, engineering and perhaps other occupations such as paramedical groups, alternative medicine groups and (as Professor Fels said) real estate agents. That should not be regarded as comprehensive.
The point of the discussion thus far is to identify the characteristics of those occupations which qualify as professions. Broadly speaking, that is because they have the two or three key features of service, discretionary judgment applied to special learning, and (to some) independence of structure (and interdependence within that structure) which might make the application of competition law regulation to them other than routine.
SHOULD THE PROFESSIONS BE SUBJECT TO COMPETITION LAW REGULATION?

Recent European and American literature suggests that their debate is still as to the extent to which competition law regulation should extend to the professions; rather than about how its application has affected the professions and their regulation, and might affect the professions in the future.

In New Zealand and Australia, the simple fact is that the Commerce Act 1986 (NZ) and the Trade Practices Act 1975 (Cth) (TP Act) apply to the professions equally as to any other occupational group. That issue has long been resolved in each of our jurisdictions. Indeed, the facility with which New Zealand was able to bring about that circumstance, compared to Australia, reminds me of the remarks of Professor Brunt, who once humorously described the Australia-New Zealand relationship in this context as follows:

[p]icture the lumbering elephantine Australia accompanied by its mobile little companion animal New Zealand, skipping along, sometimes ahead, sometimes dropping behind, sometimes circling in dazzling fashion.22


Part IV of the TPA principally regulates competition issues. It is largely, but not entirely, the mirror of Pt II of the Commerce Act. Part V of the TPA deals with consumer protection, along with the Fair Trading Acts of the States, again largely mirroring the Fair Trading Act 1986 (NZ). There are historical and constitutional reasons why Australia has a confetti of Fair Trading Acts. As in Australia, New Zealand has also implemented sector-specific legislation in relation to certain regulated industries.23
This paper will focus on Part II of the Commerce Act and Part IV of the TPA. Although both Acts apply equally to individuals, corporations and businesses24 in the conduct of professional practices, it was not always so. The Commonwealth of Australia, having power over only identified arenas, could only legislate to cover trading corporations and services operating in interstate trade or commerce or when utilising particular facilities such as telephones. Hence, the professions in 1975 and for many years thereafter, being conducted through sole practices or partnerships rather than incorporated entities were beyond its reach. Some State and Territory legislation even exempted certain conduct from the reach of the TPA by specifically approving or authorising it.
The Trade Practices Commission (the TPC) (now the ACCC) in December 1990 released a discussion paper on “Regulation of professional markets in Australia: issues for review”. At the time, as it found, the professions were subject to a diversity of government and self-regulation arrangements which varied considerably between individual professions, and between individual States and Territories.
That discussion paper commented:
The traditional justification for regulation of the professions has been the protection of consumers through measures to maintain the quality of services and the competence and integrity of their providers. It is being recognised increasingly, however, that such regulation is not without cost to consumers and the community. To the extent that it restricts competition, the service choices available to consumers may be limited, the incentive to innovate and contain costs may be reduced and prices may be inflated as a result.
From the community’s perspective, as well as that of the professions themselves, it is therefore important to be able to identify both the benefits and the costs of existing regulatory measures and to assess, as far as possible, for individual professions whether those regulations provide net benefits for consumers after taking account of any costs resulting from restrictions on competition.25
Subsequently, the TPC issued separate final reports on the accounting profession in July 199226, on architects in September 199227; and on the legal profession in March 199428. At the time, the final report on the legal profession was seen as quite challenging. It recommended the application of the TPA to the legal profession, mutual recognition of legal professionals throughout Australia, opening to non-lawyers the opportunity to supply legal services in a range of areas (to be further identified), the structural separation of barristers and solicitors within the legal profession to be abolished; caution in the use of specialist accreditation schemes; relaxing of rules regarding ownership of legal practices; and other matters. The medical profession escaped the particular attention of the TPC at that time.
During that process, the committee chaired by Professor Hillmer was inquiring into national competition policy at the behest of all Australian governments. The Hillmer report29 said that the professions comprised an “important sector of the economy”30, and that it was difficult to justify the non-application of the TPA to the professions31.
The Hillmer report, together with the several reports of the TPC into the professions, led to the TPA from November 1995 applying in full to the professions.32
That objective was achieved in 1995 and 1996 by the enactment of Competition Policy Reform Acts, by each of the State and Territory parliaments. Those Acts contained Competition Codes which mirror the provisions of Part IV of the TPA, but extending their application to individuals rather than corporations only. By that lumbering elephantine process, the reach of Part IV of the TPA was extended to the professions.
New Zealand had no such constitutional contortions to go through. The Commerce Act was able to, and did apply to the professions and to professional associations, including the health sector.33
THE LEGISLATION
Both the TPA and the Commerce Act have been amended from time to time. Over time, the content of Part II of the Commerce Act and Pt IV of the TPA has become closer, although it is not identical. It has been said that the Commerce Act was amended in 2001 to update the key tests and thresholds in line with international trends, particularly that of Australia.34
Figure 1 which follows illustrates the closeness of those Parts of the Acts, and the differences:
Figure 1 Comparison of anti-competitive practices

Anti-competitive conduct

Trade Practices Act 1974 (Cth)

Commerce Act 1986 (NZ)

Other relevant information

Agreements substantially lessening competition


Sections 45

Section 27




Exclusionary agreements

Sections 45 and 4D

Section 29

  • It is a per se breach under s 45 of the TPA

  • S 29 does not create a per se ban; a provision is exclusionary only if the target of the arrangement is a competitor of the parties to the arrangement, and the arrangement must substantially lessen competition.

  • Agreements falling under these sections are sometimes referred to as primary boycotts. The TPA also has secondary boycott provisions, namely ss 45D-45EA.




Price fixing

Section 45A

Section 30

  • These sections act as deeming provisions; they create per se breaches.




Covenants lessening competition

Section 45B

Section 28

  • The sections have substantially the same effect, except that subs 45B(4)-(6) and (8)-(9) of the TPA do not have equivalents in the s 28.




Covenants in relation to prices affecting competition


Section 45C

Section 34




Misuse of market power/taking advantage of market power

Section 46

Section 36

  • Both Acts also have provisions relating to trans-Tasman conduct relating to misuse of market power (ss 46A of TPA; s 36A of Commerce Act).




Exclusive dealing

Section 47

No equivalent

  • In NZ exclusive dealing is said to be caught by the operation of other provisions such as ss 27 and 36

  • The third line forcing component of s 47 is a per se breach. The other components of it require a “rule of reason” approach.




Re-sale price maintenance

Section 48

Sections 37-42

  • S 37-42 apply only to goods whereas s 48 applies to goods and services.

  • Note also the operation of Part VIII of the TPA as supporting provisions to s 48.




Mergers and acquisitions lessening competition

Section 50

Section 47


  • S 47 appears in Part III, not Part II.

  • There are some minor technical differences between the two provisions.

  • The TPA also covers acquisitions outside Australia in s 50A.



More fundamentally, and as one would expect, similar key concepts appear in both Acts such as the concept of a “market”.35 It should also be noted that both the TPA and the Commerce Act also have exceptions to the anti-competitive provisions.36 It appears that the only provision of the TPA not substantially mirrored in the Commerce Act is s 49 which deals with dual listed company arrangements that affect competition.


Essentially, Australia and New Zealand have competition laws that are considered “fairly well harmonised” with the “differences not all significant”.37 The major difference is considered to be that the TPA has a high number of per se offences.38 Even though New Zealand and Australian case law is freely cited in judgments of each jurisdiction,39 it has been noted that there is still slight potential for there to be interpretive differences by the respective courts and regulators in both countries.40 An example of this is in the application of the substantial lessening of competition test relevant to provisions dealing with exclusionary agreements and mergers and acquisitions.41
One final observation, with particular importance to the professions, is that in Australia the National Competition Council deals with issues relating to restrictions on professions imposed by legislation which may affect competition and which are outside the scope of the TPA; whereas privately imposed restrictions (via self-regulation arrangements) fall within the scope of the TPA.42 It is not clear whether there is a similar arrangement in New Zealand.43

HOW COMPETITION LAW HAS BEEN APPLIED TO THE PROFESSIONS
The professions since at least 1995 have not been under the radar of either the ACCC or the Commerce Commission, although Pengilley has said that in both Australia and New Zealand, enforcement authorities have traditionally enforced competition laws against “business” before “getting around to applying it to the professions”.44 The professions, and their institutional bodies, have no reason to relax their awareness of the applicability of the Commerce Act and the TPA to their activities.
The ACCC has a clear commitment to securing compliance with and enforcement of Part IV of the TPA relating to the professions. It has identified several broad issues of concern for the professions. These include monopoly in certain areas of the professions; entry restrictions; anti-competitive behaviour and price regulation. That is not an exhaustive list.45 In 2001, the ACCC established a dedicated Professions Unit with resources specifically directed towards promoting compliance and awareness,46 although its functions are now spread across Commission staff and among Commissioners.47 Nonetheless, clear promotion of regulation affecting professions appears on its website and with numerous publications also available to the public. At present, it appears to have a particular focus on the health sector.48 Many reviews and reports have also been conducted on the health sector and competition.49
Focus of the regulator upon the professions is not nearly as obvious in New Zealand. The Commerce Commission’s website does not refer to the interests of professions as prominently as that of the ACCC. However, references may be found in documents such as a 2005 briefing which identified the professional health sector as an area of concern.50 The Commerce Commission’s news releases on prominent cases also indicate an interest in the professions.51 As with Australia, the apparent focus is upon the health profession.
Interestingly, there has been global interest in the application of competition law to the professions, with studies conducted in the United States on the health care market;52 and in the UK and Europe in relation to the legal profession.53 Several studies have also been conducted in Europe on professions generally54 and similarly in Canada on self regulated professions.55 Australia’s Productivity Commission has also prepared a discussion paper on professions.56
It is unclear why the regulator’s focus is predominantly on the professional health/medical sector. One might speculate that there is a perception that the health sector, including the health professional groups may have less awareness of competition regulation than other professions. There may be a perception that the other professions have been more responsive to the need to restructure to avoid anti-competition conduct. It has also been suggested that heavy regulation of a profession, such as the medical profession, can contribute to a higher number of complaints which then attracts the attention of regulators.57
How then has this focus – on price fixing or boycott conduct between professionals, institutional restrictions such as on advertising or forms of professional conduct disapproved by disciplinary bodies, entry restrictions, or on misleading conduct – been reflected in experience over the last 10 or 15 years?
In the case of the medical profession, as discussed by Janes58, the application of competition law has been utilised in quite a vigorous way.
Under the Commerce Act, the medical services market (using a generic description – there are obviously more refined markets, both by the nature of the services provided and by geography) is covered in the same way as markets for most other services.59 The s 2 definition of services covers the services provided by medical practitioners, whether individually, or under a corporate or association structure, unless the work is undertaken under a contract of service (employment contract).60 Practitioners acting as part of any body corporate or association are also subject to liability, as well as the entity itself.61 The situation is similar under the TPA.62
It is clear that both countries identified the medical profession as having poor awareness of competition regulation. In 1997-1998 financial year, the Commerce Commission’s Annual Report identified the health sector as a special area of focus due to its poor awareness of the Commerce Act.63 This was again raised in 2005.64 Similarly, in Australia the Wilkinson Review in 2002 comprised a major analysis of the medical profession. It examined the impact of the competition provisions of the TPA on the recruitment and retention of medical practitioners in rural and regional Australia, and found that there was a degree of uncertainty and misconception amongst the medical profession regarding the application of the TPA to doctors, particularly in the areas of medical rosters, collective negotiations and fee setting.65
Many areas of market failure in the medical profession have also been described by commentators and are said to result from the unique characteristics of the professional medical market.66 Competition law principles are still applied regardless of the responses of the medical professional based on the “unique characteristics inherent in the delivery of medical services”.67
The recent case of Shahid v Australasian College of Dermatologists68 (“Shahid”) demonstrates that medical professionals and their professional associations may be engaged in trade and commerce no less than any other profession, corporation or individual under the TPA.
Dr Shahid was a general practitioner who developed an interest in being recognised as a specialist dermatologist. That required status as a Fellow of The Australian College of Dermatologists (the College). The College required, for fellowship, a period of supervised training in an accredited post for a period of 4-5 years. The accredited positions were only obtainable on the recommendation of the College, that is in effect were granted on selection by the College. In Western Australia, where Dr Shahid lived, there was only one accredited post available in each year. She was unsuccessful in each of the several years she applied to be accepted to one of those posts.
Dr Shahid did not complain that the selection process, and the general role of the College, was anti-competitive. She complained that the College had engaged in misleading and deceptive conduct about the attributes that she should have and promote in her selection applications, and about its selection processes and appeal rights. Consequently, for present purposes, the outcome of the case is not especially significant. What is significant is that the College, which principally promoted dermatological research and training, and conducted examinations leading to the award of diplomas, was a trading entity. It was engaged in trade and commerce, including by its conduct of meetings, conferences and courses (per Branson, Stone and Jessup JJ69) and by the publication of its training program handbook (per Branson and Stone JJ70, Jessup J dissenting71). The training program handbook contained certain of the misrepresentations found to have been made.
That outcome reflected an energetic understanding of the nature of the College’s activities, notwithstanding its professed and – it may be accepted – genuinely intended benevolent purposes. The emphasis, dictated by the High Court of Australia’s decision in Concrete Constructions (NSW) Pty Ltd v Nelson72, was upon whether in fact its activities or transactions had a trading or commercial character.
In Concrete Constructions, a construction worker, who was injured when he fell to the bottom of a shaft because a grate was not secured, claimed damages for misleading conduct contrary to s 52 of the TPA by his employer through the foreman telling him that the grate was secured. The Court held that the foreman’s conduct was not in trade or commerce because it did not have a trading or commercial character.
The medical profession appears to have been at the forefront of regulators concerns about the professions in both Australia and New Zealand. For regulators, it seems that exclusionary arrangements (although by no means the only issues) have been a major anti-competitive concern73. Typically these arrangements can relate to concerns over price negotiations and recommended fee structures. Much has already been written on this issue. 74
In the recent case of ACCC v Knight [2007] FCA 1011 contraventions of s 45 of the TPA and the mirror provisions of the South Australian Competition Code were admitted by the defendants (“Messrs Knight and Ross”).75 Messrs Knight and Ross were cardiothoracic surgeons practising in Adelaide at certain private and public hospitals. They had been involved in the supervision of a Mr Jurisevic, who had been in training as a cardiothoracic surgeon. In 2001, Mr Jurisevic had been admitted as a Fellow of the Royal Australasian College of Surgeons, and had completed all the statutory requirements for eligibility to be registered as a cardiothoracic surgeon (in all some 14 years training). He needed hospital accreditation as the final step. It was usual, but not mandatory, that such accreditation was given after an applicant for accreditation had about two years of overseas experience as well, but Mr Jurisevic did not want to do that. In 2001, Mr Jurisevic sought his accreditation. Messrs Knight and Ross (who were influential members of a small group of cardiothoracic surgeons) made an arrangement to hinder this process. They did so by speaking to the relevant accreditation body, expressing their reservations about Mr Jurisevic being suitably experienced for accreditation and so to conduct private practice. They supported this with written advice. Mr Knight had previously supported Mr Jurisevic’s application for Fellowship. In an unrelated claim, also contravening s 45 of the Act, Messrs Knight and Ross invited a Mr Edwards, another cardiothoracic surgeon, to become party to an existing arrangement between certain accredited surgeons which was in essence an arrangement whereby certain cardiothoracic surgeons would not fully compete against one another so they shared the market, by working in one of either public hospitals and one of either of the major private hospitals.
Their conduct in both respects clearly contravened s 45 of the TPA.
The Court proceeded on the basis (as the ACCC had accepted) that Messrs Knight and Ross held genuine beliefs about what was considered appropriate in the context of Mr Jurisevic and Mr Edwards; and that their actions were only deliberate in the sense of not being involuntary or accidental.76 A pecuniary penalty of $55,000 was imposed on Messrs Knight and Ross respectively, who were also ordered to attend a trade practices compliance seminar. Their conduct clearly created barriers to entry and a substantial lessening of competition in a small but clearly definable market. It is also illustrative of the lack of awareness in the medical profession of competition regulation.77
As for New Zealand, the Commerce Commission v The Ophthalmological Society of New Zealand Inc (2004) 10 TCLR 994 is a well known case. It concerned an arrangement entered into by several ophthalmologists and the Ophthalmological Society of New Zealand which hindered a hospital in Invercargill from hiring an Australian ophthalmologist, Dr Silva, in order to ameliorate the effects of Invercargill’s high waiting lists for cataract surgery. There had also been a prior arrangement or understanding to a lesser extent relating to another Australian ophthalmologist, but the main conduct in question related to Dr Silva.78 The effect of the arrangement was that the Australian doctor was unable to obtain the supervision required to enable him to practice in New Zealand. Some of the parties to the arrangement then carried out the surgery which the Australian doctor would have performed. The Commerce Commission successfully proved that the agreement breached s 27 of the Commerce Act.
In deciding appropriate penalties, Gendall J gave a separate judgment: [2004] 3 NZLR 689. The Court accepted that all of the parties to the arrangement were clearly unaware of the potential to contravene the Commerce Act though this did not mean they had acted “innocently”.79 His Honour imposed pecuniary penalties of $NZ100,000 on the Ophthalmological Society of New Zealand; $NZ25,000 on Dr Rogers and $NZ5,000 on Dr Elder, as doctors involved in the contravention.80 Some doctors escaped liability.81 The Society’s penalty equalled the total sum of its entire assets. It has been labelled a “stern” penalty in comparison to the “lighter” penalties imposed on the individual doctors.82 The case was not a test case but the first case involving professional persons and their society.83 A planned appeal by the Society and doctors was discontinued.84
Price-fixing in the medical profession has also in the past been a concern for regulators in both jurisdictions, as a few select examples illustrate. In 1997, the ACCC settled an action against the Australian Society of Anaesthetists.85 The action alleged price fixing and boycotts in the form of an agreement to set recommended on-call fees to be paid by private hospitals to anaesthetists. In the same year the Commerce Commission issued warnings to midwives and doctors for their attempt to form collective agreements covering payments for maternity care in two unrelated incidents, because it risked breaching the price-fixing prohibitions of the Commerce Act.86

In 2001, the issue again came to the fore with the ACCC’s action against the Australian Medical Association (Western Australian Branch) (“the AMA”) and Mayne Nickless Ltd, the controller of the Joodalup Medical Campus. It was alleged that the AMA, by negotiating on behalf of doctors at Joodalup Hospital, arrived at and gave effect to an understanding to fix prices for medical services to be provided at the Hospital.87 The AMA admitted the contravention and penalties were imposed. Curiously, Mayne Nickless defended the action and was found not to have contravened the TPA. Similarly, in 2005, the Commerce Commission issued warnings regarding potential price-fixing behaviour to individual GPs who collectively decided to set a maximum fee level for a specific group of patients.88



Professor Pengilley has said that price-fixing and exclusionary conduct in the context of pricing arrangements by medical practitioners can give rise to the same anti-competitive result though it may be effected by different means.89
The North American experience has been not dissimilar.
Under American anti-trust laws, medical professionals are subject to the restrictions imposed by the Sherman Act, especially section 1 which governs collective action in restraint of trade.90 Similarly, all professions, including the medical profession, are clearly not exempt from anti-trust regulation.91 Specifically, section 1 prohibits conspiracies and agreements that unreasonably restrain trade.92 It requires an agreement and/or conspiracy between parties that is intended to harm or unreasonably restrain competition.93 It must also have actually caused injury to competition beyond the claimant, and within a field of commerce in which the claimant is engaged.94 Either a per se or a rule of reason analysis is used.95 Section 2 of the Sherman Act relates to illegal monopolization and similarly requires proof of an anti-trust injury.96
The US Federal Trade Commission and US Department of Justice work to enforce anti-trust laws, with the former entity having a history of “vigorously” pursuing violations of the prohibitions on price-fixing in the context of professional medical associations adopting fee schedules, and recommending or negotiating fees on their members’ behalf.97 This conduct has been considered per se unlawful in the US.98 Some conduct has even been criminally prosecuted by the Department of Justice.99
There is also a significant degree of interest in exclusionary arrangements other than those relating to price-fixing. For example, in Hilton v. Children's Hospital San Diego, 2007 U.S. Dist. LEXIS 16517 (S.D. Cal., Mar. 7, 2007) the plaintiff alleged that an agreement between the defendants, who were part of a diagnostic radiology group providing radiology services at Children’s Hospital San Diego, was (amongst other allegations) a violation of sections 1 and 2 of the Sherman Act.100 The agreement prevented radiologists from the University of California San Diego Medical Center practising at the Children’s Hospital San Diego by requiring proof of competency in order to be entitled to certain practicing ‘privileges’. The Ninth Circuit concluded that “… [the conduct was] not undertaken in good faith and in the interest of good health care, but as a ruse or cover to obscure a decision already made unlawfully to exclude her from an aspect of her practice…”.101 However, the Court found that the plaintiff had failed to establish a critical part of her case under both sections of the Sherman Act – that of the existence of an anti-trust injury.102 Accordingly summary judgment was entered for the defendants.103
It is clear that section 1 of the Sherman Act encompasses conduct including price-fixing, illegal monopolies (akin to misuse of market power) and group boycotts.104 It is also important to note that specific types of anti-competitive arrangements may also have other legislation in place to effectively deal with them. Such includes the “anti-kickback” statutes brought into play to prosecute medical device manufacturing companies involved in illegal kick-back arrangements with doctors and hospitals in the US recently.105
A study commissioned by the Federal Trade Commission and the Department of Justice in the US also indicates similar problems of heavy regulation, information asymmetry and collective bargaining for the medical profession, much like the situation in Australia.106
Canada does not appear to have had a similar focus on the medical profession. Section 45 of the Competition Act, ( R.S, 1985, C-34 ) prohibits conspiracy by way of agreement or arrangement which unduly restrains or injures competition; and there are also several other circumstances which are sufficient to satisfy the section.107 Clearly, market power and market share are relevant to cases under s 45. Section 45 of the Competition Act was considered in Janelle Pharmacy Ltd v Blue Cross of Atlantic Canada108, in which pharmacists unsuccessfully sued their health benefits insurance provider.
Attention to the health professions extends beyond general or specialist medical practitioners and their associations.
Occupations within various industries are pushing for recognition as discrete and emerging professions109. Apart from medical related professions, such as physiotherapy and psychology, one is the natural medicine industry, commonly called the complementary and alternative medicine industry (“CAM industry”).
In Australia, there has been suggestion of self-regulation of the CAM industry as a profession, as an alternative to subjecting it to the statutory regulation akin to the medical profession.110 Notably, the 2003 report of the Expert Committee on Complementary Medicines in the Health System, commissioned by the Federal Government at the time, recommended self-regulation as well as government statutory regulation where necessary for the CAM industry, amongst other suggestions.111 Despite this, there has only been some degree of success in the push for professional recognition in the CAM industry112. The regulation of Chinese Medicine professionals in Victoria has been established by statute. Under the regime, practitioners must have relevant qualifications as required by the established Chinese Medicine Registration Board, amongst several other regulatory measures imposed.113
In New Zealand, the issue has also been pushed by certain CAM organisations with similar suggestions of statutory regulation for some CAM occupations.114 The issue was raised generally in 2006 with the Ministry of Health releasing a proposal put forward by the New Zealand Association of Medical Herbalists that herbal medicine become a regulated profession under the Health Practitioners Competence Assurance Act 2003 (NZ) (“HPCA Act”), thus joining another 21 professions including medical practitioners and dentists regulated under the legislation.115 The proposal was approved.116 The HPCA Act is similar to the Victorian enactment in that registration bodies are set up via statute for professions under the Act for monitoring of qualifications and competence.117
In Australia, the ACCC’s concern in this area, as it continues to develop, is to ensure that industries such as the CAM industry are not implementing services in ways that breach the TPA, particularly regarding their arrangements for registration or recognition of practitioners.118 This issue is in its nascent stages, but no doubt regulators will keep a watchful eye over any progress that is made in the recognition of CAM industry as a profession as they do with other professions. It too has potential for complaints of anti-competitive conduct just like any other regulated profession.
By way of comparison, the US has extensively examined the CAM industry and its practitioners.119 In 1995, there was a suggestion that licensure laws and regulations were limiting the CAM industry so that they fostered a medical monopoly of the market for ‘traditional’ medical practitioners by restricting the scope of alternative practices and access to them by consumers.120 This in turn was said to increase costs for consumers.121 Despite such concerns, access to a range of CAM practitioners by consumers has increased.122 It appears to be an incremental ongoing increase.123 It is really a question for economists as to whether regulation of the medical profession leads to the same effect, namely increased costs to consumers. As the medical profession is regulated in a similar way to the CAMs professions in the US (including by government statutory schemes or “statutory self regulation” as its known in the US)124, and there has been a continuous rise in the use of CAM professionals even though very few are recognised as regulated medical professionals125, it may be hypothesised that the same conclusion should be reached. Australia still apparently intends to maintain some level of government regulation of the CAM providers.126
It is desirable to refer briefly to cartels in the context of the professions.
Cartels are not a legally defined term in either of the Acts. In both Australia and New Zealand, they are typically used to describe arrangements that result in price-fixing, bid rigging and market sharing.127 Clearly, professions may engage in unlawful cartel behaviour, if they are unwise enough to do so.
Regulators in both Australia and New Zealand have taken a tough stance on cartel behaviour. The Commerce Commission has publicly declared that “price-fixing cartels will not be tolerated”128 and “New Zealand is a country where the cartel participants should never feel safe…[w]herever cartels may be, the commission will use all the tools at its disposal to discover, pursue and attack them”.129 The epitome of the ACCC’s stance is demonstrated in the media fanfare surrounding the case ACCC v Visy Industries Holdings Pty Ltd (No 3)130, and in its support for the proposed criminalisation of cartel conduct. 131
A notable difference between Australia and New Zealand is that New Zealand apparently has no plans to criminalise cartel conduct132. New Zealand’s stance is also out of step with the US and the UK where imprisonment terms may be imposed for cartel behaviour.133
New Zealand’s reasoning for not following the trend towards criminalisation of cartel conduct was stated in a 2001 review.134 This inquiry found that imposing a higher criminal standard, with imprisonment terms for offenders, was likely to lead to fewer prosecutions and a reduction in the number of successful cases, particularly given the higher onus of proof in criminal cases and the right against self-incrimination.135 Optimists, however, have not ruled out a change of perspective for New Zealand on the criminalisation issue.136 There are obviously contrary views. As summarised in an OECD paper, Canada is of the view that corporate fines alone are not sufficient to deter cartel offenders but that it is the dual threats of effective investigation and class action for compensation, coupled with the risk of imprisonment, that is most effective to deter in.137. The US holds similar views, accepting however that the continued existence of some cartels is not evidence of imprisonment failing as a deterrent.138
Australia is clearly adopting the mainstream approach. The recently proposed legislation aims to amend the Act and introduce cartels as a legally defined term.139 It is proposed that there be criminal sanctions for cartel conduct introduced, conduct which is described in the media “hardcore cartel conduct”.140 The Bill aims to introduce two criminal offences for cartels under Part IV of the Act - namely the making of, as well as the giving effect to, a cartel arrangement.141 Several other changes proposed related to the way cartel investigations are conducted and also to civil offences.142
However, the draft Bill has been criticised for being extremely complicated.143 One of the most critical observations concerns the “dishonesty test” or the concept of “intention to dishonestly obtain a benefit”.144 Beaton-Wells and Fisse have argued the test is not sufficient to enable the distinguishing of criminal from civil offences.145 This is because dishonesty is likely to be present in many civil penalty cases and is not a “hallmark” of criminal cartel behaviour.146 Heerey J has argued that the dishonesty element contained within the Bill “opens up an infinite field of subjective and value laden factors”.147 His Honour has said that the concept should be removed from the proposed reforms and that the US experience (which does not contain any such concept) ought to be adopted.148
Obviously, criminalisation of cartels should ring strident alarm bells for the professions. Unlike civil penalties or other civil remedies, which do not necessarily constitute conduct warranting professional disciplinary conduct, a criminal conviction related to the practice of a profession should do so. And, as Beaton-Wells and Fisse pointed out, the investigative resources of the ACCC are very extensive, potentially very intrusive, and obviously when exercised will be very disruptive to a professional’s practice. They include powers to obtain a warrant to use surveillance devices (including listening, optical and tracking devices) under the Surveillance Devices Act 2004 (Cth) (“the SD Act”).149 That power would be available because the proposed offences, with maximum 5 year imprisonment terms, would fall within the scope of the SD Act.150 Surveillance devices under the SD Act can be used in respect of conversations, activities or locations of certain persons.151 Various warrants under other Commonwealth Acts may also potentially be utilised for similar purposes by the ACCC for similar reasons.152 This is comparable to interception powers possessed by regulators in other jurisdictions.153 It is reasonable also to question whether professions with their claimed focus on public service (with obligations of trust and confidence) ought to be more concerned about this consequence of the proposed reforms.154 A number of the “non-traditional professions” are generally aware of the potential impact of the proposed reforms in Australia. Submissions have been made by professional associations or representative bodies during public consultation period for the proposed Bill.155 On the issue of the interception powers, the Fair Trading Coalition raised general concerns and the Australian Banker’s Association was more explicit in its opposition to it, specifically referring to privacy issues.156 There has been an apparent lack of response by some of the “traditional professions”, such as the medical profession.


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