Belgium ends merger control in the hospital sector

August 2024  |  SPECIAL REPORT: COMPETITION & ANTITRUST

Financier Worldwide Magazine

August 2024 Issue

After a long battle with the Belgian Competition Authority (BCA), on 28 March 2024 the Belgian legislator adopted a law that excludes hospitals from merger control under the Belgian Code of Economic Law. This comes after a period of turmoil between the BCA and the Belgian legislator over the application of merger control in the hospital sector.

Background

In Belgian Competition law, under certain conditions, mergers and acquisitions (M&A) may be subject to formal authorisation by the BCA. To protect competition in a specific market, a concentration that entails a lasting change of control for an undertaking must be notified either to the BCA or to the European Commission (EC), depending on certain thresholds of turnover of the concerned parties. In Belgium, M&A transactions must be notified to the BCA when the two parties concerned individually have a turnover of €40m in Belgium and all the parties have a collective turnover of at least €100m in Belgium.

Previously, hospitals were not considered undertakings under competition law. However, following the evolution of European jurisprudence, they qualify as undertakings when they offer economic services in exchange for remuneration. In some countries, such as Spain, hospitals are an integral part of a national health service and directly funded from social security contributions. In that case, they are not considered undertakings.

In Belgium, patients contribute to the cost of the services even if a large part is reimbursed by social security.

In the judgment of 12 November 2012, the General Court of the EU validated the application of state aid rules to the public funding of public hospitals in Brussels, confirming their status as undertakings under competition law.

In practice, however, hospitals subsequently failed to notify their merger or acquisition to the BCA under merger control.

On 28 February 2019, the Belgian legislator compelled hospitals to create and be part of a loco-regional hospital network, starting 1 January 2020. In the context of this reform, hospitals informally contacted the BCA to verify their obligation to notify those projects of setting up formal networks under merger control, which was confirmed officially by the BCA when the project went beyond what was strictly imposed by the law in terms of cooperation and when the turnover thresholds were met. Indeed, the healthcare sector, and more specifically the hospital sector is subject to the same competition law requirements as other sectors.

But due to the timetable of the reform and the number of networks to set up, the Belgian legislator passed the law of 29 March 2021, which exempts the establishment of loco-regional hospital networks and other changes in this network’s composition from prior merger control under Belgian competition law.

This issue was, nevertheless, brought to the attention of the hospitals and the BCA finally received a notification concerning the merger of the university clinics of Brussels and Jules Bordet Institute. Moreover, on 28 June 2023, the BCA also partially lifted the standstill obligation (which prohibits the implementation of a concentration until the Belgian competition authority has approved the concentration) for a concentration between the Jolimont hospital group and the Ambroise Paré hospital.

On 14 July 2023, the BCA published a communication confirming its general competence to assess concentrations of hospitals under merger control.

New act of 28 March 2024

In its dealings with the BCA, the Belgian legislator has had the last word on this matter. The Belgian legislator’s exemption of hospital mergers from merger control was approved on 28 March 2024. Although this exception already applied to loco-regional hospital networks and every change in its composition, this exception will now apply to all concentrations of hospitals in general. The Belgian legislator has kept a door open for transactions between hospitals when at least two of the hospitals individually have a turnover in Belgium of €250m and all hospitals in the concentration have collectively a turnover in Belgium of at least €900m.

The first draft was also presented to the Federal Public Service of Health, which rendered advice on 16 November 2023. In this advice, the Federal Public Service of Health clearly stated that the draft proposal exempting hospitals from the Belgian merger notification requirement was justified and necessary. For other sectors, such as the Federal Council of Hospitals, the competence of the BCA regarding prior review of concentrations should not hinder the initiatives of collaboration, nor should it slow down the process of integrating hospitals. Moreover, according to the Federal Council of Hospitals, the BCA’s investigations added to the hospitals’ administrative and financial burden. In recognition that certain hospitals are different from others, the Federal Council of Hospitals also applauded this draft proposal.

Finally, the draft was also presented before the Belgian Council of State, which believed that the BCA’s exemption did not threaten the accessibility, quality and affordability of services, nor did it affect the free choice of users or providers to obtain or provide services. For the Council of State, the draft was not discriminatory.

In both its 2023 and 2024 priorities notes, however, the BCA listed the pharmaceutical and healthcare sectors among its priority sectors. It also recalled that in the exercise of its residual powers, it will continue to monitor the consolidation of the hospital sector, particularly in less populated regions. The BCA in its 2024 priorities notes said that it will not hesitate to take appropriate action against any anti-competitive practices by healthcare establishments and healthcare professionals, particularly over unregulated fees and charges. The BCA finally expressed once again its concerns on this subject. In its opinion, while the law is binding on the BCA, the BCA will be particularly vigilant in the future to ensure that all players in the healthcare sector comply with competition rules while taking into account their specific characteristics.

Prior to the adoption of the law, the BCA reminded the Belgian legislator that its competence as an authority reviewing concentrations is to evaluate whether in the future the best products or services will still be offered on the best possible terms. The BCA requested that its position be heard in a press release on 20 February 2024. Its request, however, was denied. According to the Belgian government, there was no added value to present the BCA’s arguments since the position of the BCA was already known. In the preparatory work of the act of 28 March 2024, the Belgian legislator justified exempting hospital concentrations from merger control based on several arguments. For instance, the administrative and financial simplification brought by the Federal Council of Hospitals was an important argument in favour of the exception.

Conclusion

Although the saga of the Belgian legislator and the BCA seems to be over, the BCA has highlighted the importance of the pharmaceutical sector and the healthcare sector in its 2024 priorities note, which was made public on 7 June 2024. As stated, the BCA will not hesitate, in exercising its residual powers, to monitor consolidation in the hospital sector, particularly in less populated regions. As the Belgian legislator intended, however, the BCA’s authority to review hospital concentrations has now been diminished to nearly the fullest extent of its capacity. Its competence remains only in very specific circumstances. It should be noted, however, that although the Belgian legislator has reduced the BCA’s authority over hospital concentrations in Belgium, the EC remains competent to review Belgian hospital concentrations if they reach the European thresholds for review.

 

Annabelle Lepièce is a partner and Sébastien Willems is an associate at CMS Belgium. Ms Lepièce can be contacted on +32 2 743 69 34 or by email: annabelle.lepiece@cms-db.com. Mr Willems can be contacted on +32 2 674 85 67 or by email: sebastien.willems @cms-db.com.

© Financier Worldwide

BY

Annabelle Lepièce and Sébastien Willems

CMS Belgium

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