The Federal Court of Australia today found that three orthodontic businesses*, each operating in northern Tasmania, had contravened section 45 of the Trade Practices Act 1974 by engaging in price fixing and market sharing.
Justice Peter Heerey, found that the respondent orthodontists, in various combinations, entered into a series of illegal anti-competitive arrangements to:
- fix the price of the orthodontic services they each provided to consumers in northern Tasmania
- restrict their respective supply of orthodontic services to new patients when an orthodontist had more customers than the others
- restrict the ability of the orthodontists to supply their respective services from separate premises or work with other orthodontists within 20 kilometres of the existing practices in Launceston, Devonport and Burnie, and
- stop another orthodontist from setting-up a competing practice in northern Tasmania.
The court heard that the respondent orthodontists provided their services from shared premises in the cities of Launceston, Devonport and Burnie, and that the majority of the illegal arrangements were written into the shared premises co-location agreement.
"Co-location agreements are common within the medical profession and when established correctly they offer an opportunity to deliver more affordable medical care to consumers by defraying the cost of independently operating medical premises and sustaining a presence at multiple locations," ACCC Chairman, Mr Graeme Samuel, said today. "However, the mere fact that competing businesses are co-located does not provide those businesses with a license to fix their fees."
The court heard that the co-location agreement containing the illegal clauses was drafted by a lawyer in 1992 and that the orthodontists relied on that lawyer's legal advice. The court also heard that another orthodontist who had joined the co location agreement at a later date had also sought his own legal advice and the lawyer in that instance also failed to identify the illegal clauses.
"This is a most unusual case where the respondents and other orthodontists in the co-location agreement relied upon poor legal advice from multiple law firms," Mr Samuel said. "The multiple failures highlight the need for lawyers to consider the potential application of competition law when assessing any agreement between competitors."
In light of the repeatedly faulty legal advice received by the orthodontists and because the respondents cooperated with the investigation, the ACCC took the unusual step of not seeking a monetary penalty. The court confirmed the ACCC's position when it found that in all the circumstances it was sufficient to deal with the matter by way of a series of injunctions restraining the orthodontists from again engaging in the anti-competitive conduct. The court also ordered the respondent orthodontists to attend a trade practices law seminar and to make available trade practice reference material at the co-located premises.
The ACCC will be conducting an industry education campaign to encourage co-located medical providers and their legal advisers to review existing co-location agreements with particular reference to competition law.
*The orthodontic businesses are: Dr Sawindar Ranu and his company, Ranu Pty Ltd; Dr Paul Crowe and his company, P. R. & G. Crowe Pty. Ltd.; Dr Antanas Stankevicius and his company, Hazel Ridge Pty. Ltd.