Price fixing is taken very seriously by the ACCC and the courts. By its very nature fixing prices is anti-competitive and breaches the competition laws. It is conduct that causes significant economic and consumer harm. Doctors therefore need to know what does and does not amount to price fixing.
be ‘aware’ of others’ fees—mere ‘awareness’ is not price fixing
exchange fee information to obtain informed financial consent from patients
advertise your fees, so long as the information you provide is not misleading
note that the ACCC will not take action against agreements to bulk bill
contact the ACCC infocentre (1300 302 502) if you have any questions
Doctors practising within a single legal entity can agree on fees charged to patients without breaching the competition laws.
DO NOT …
collectively agree with your competitors on what fees to charge patients
forget that price fixing is not necessary to operate a roster
use recommended fee schedules when they, in effect, fix prices
Entities cannot collectively set the fees to be charged to their patients.Doctors practising through separate
Note for GPs: members of the same associateship, or partnership with at least one corporate partner, can agree on fees under certain conditions currently until 10 January 2007.
This leaflet is a summary only and is not a substitute for legal advice. It reflects the ACCC’s view of the law as at July 2004.
If you have any queries regarding these issues, contact your nearest ACCC office (see below).
The Trade Practices Act 1974 prohibits agreements, arrangements or understandings between competing business entities (including professionals) that fix, control or maintain prices charged for goods or services. The law against price fixing is an absolute prohibition. This means that it is not necessary to show that price fixing harms competition, competitors or consumers before it is found to breach the Act. It is deemed to be anti-competitive and unlawful.
The Act prohibits competing doctors from collectively agreeing on the fees they will charge patients. This includes agreements which claim to recommend prices but which in reality fix prices by agreement.
Although it is appreciated that doctors practise in a strong collegiate environment, for the purposes of the Act they are also regarded as carrying on a business and are therefore subject to the Act.
Doctors must set their fees in a manner consistent with their practice structure. This structure will determine how they can set their fees to ensure they don’t breach the Act. Doctors tend to operate under the following types of business (practice) structure, which are all independent legal entities:
company (private or public)
sole natural person
legal partnership with no corporate partners1
legal partnership with at least one corporate partner2
trust.
1 Partnerships are traditionally considered to be single legal entities.
Where all the partners are natural persons, arrangements agreed within the partnership are generally not subject to the provisions of the Act. This exception does not apply to partnerships where one or more of the partners is a company.
Fee setting by doctors practising within the same entity
A single company, sole natural person, legal partnership with no corporate partners, or trust is a single legal entity. All doctors practising within a single legal entity in any of these forms—either as directors, employees or partners—are considered part of the same entity. They are therefore not in competition with each other for the purposes of the Act and are able to agree on the fees to be charged by that entity, without breaching the Act. Fee setting in this situation is not illegal price fixing, but is instead an internal management decision about prices, made by the individual entity.
Fee setting by doctors practising through separate entities
Doctors practising through separate legal entities, or within a legal partnership with at least one corporate partner, are considered competitors for the purposes of the Act.
A doctor who practises as a single entity, or practises through a combination or range of entities (for different parts of their business activities) should be aware of the price fixing provisions of the Act, and must not fix, control or maintain prices with any competitors.
Each entity must independently determine the fees charged to its patients.
General practitioners should note that if they are members of the same associateship, or the same partnership with at least one corporate partner, they can agree on fees charged to patients under certain conditions currently until 10 January 2007.
The conditions vary slightly with the factual circumstance of the general practice.
Can doctors operating a roster collectively agree on fees?
Participation in a roster does not change the application of the law to the way in which doctors must set their fees.
A doctor’s chosen practice structure will determine how the Act applies to fee setting (see information on p.3). In summary:
Doctors practising and operating a roster within a single legal entity can agree on fees charged by that entity to its patients without breaching the Act, as it is an internal business decision for that entity.
Where a roster is run between doctors practising through separate entities (or within a partnership with at least one corporate partner), each entity must independently set the fees charged to its patients. The ACCC considers that collective fee setting between separate entities is not necessary to operate a roster. However, doctors who exchange fee information so they can obtain informed financial consent from patients, but who do not agree on what fees will be charged to patients, will not breach the Act. (For further information on this issue see p. 11).
General practitioners who are members of the same associateship or same partnership with at least one corporate partner can, agree on fees charged to patients until 10 January 2007. See p. 4 for details.
For further information on rosters see the ACCC leaflet, Medical rosters.
Are collective agreements about bulk billing treated differently?
Doctors practising as separate entities must individually decide whether or not to bulk bill their patients. If separate entities seek to collectively agree on whether or not to bulk bill patients, they risk breaching the Act.
Collective agreements not to bulk bill
Doctors practising through separate entities who collectively agree not to bulk bill all or certain patients are likely to be in breach of the exclusionary agreement and the price fixing provisions of the Act.
This kind of agreement between separate entities has the purpose of preventing, restricting or limiting the supply of medical services to patients in circumstances in which the fees for the services could be processed by bulk billing. That is, if there were no such agreement, patients might have been bulk billed.
Case example—collective agreement not to bulk bill in breach of the Act
In March 2003 the Federal Court declared that a doctor practising as AK Freund Pty Ltd had tried to induce a breach of the exclusionary agreement (boycott) provisions of the Trade Practices Act by:
including in its lease of rooms in medical centre premises, a set of ‘rules’, two of which required that other GPs leasing rooms at the medical centre:
not bulk bill services they supplied (except services to pensioners, holders of health cards or members of the GP’s immediate family), and
not supply services from the medical centre premises before 8 am or after 8 pm on Monday to Saturday, nor before 9 am or after 1 pm on Sundays
getting an undertaking from the lessor of the premises that no lessees of rooms in the medical centre would be allowed to contravene the rules
pursuing legal proceedings against the lessor seeking to prevent the lessor from entering into any lease of rooms at the medical centre that would allow a breach of the rules
proposing to a prospective tenant that the doctor agree to supply medical services only within the rules contained in the lease, and reject any proposed amendment to the rules which would allow bulk billing and after-hours services.
Collective agreements to bulk bill
An agreement between doctors, practising through separate entities, to bulk bill all patients may be considered price fixing. Even though it is an agreement to charge the lowest likely price, it is still an agreement between competitors on the fee to be charged and is therefore technically a breach of the Act.
The ACCC, however, has discretion over when it will take matters to court. In making such decisions it will consider a range of relevant factors, including the level of harm to consumers from the conduct, and the overall public interest.
The ACCC considers that an agreement between doctors to bulk bill all patients would be unlikely to result in any harm to patients, as the bulk billed rate is the lowest fee that a doctor is likely to charge for their services.
The ACCC would therefore not take action against agreements to bulk bill.
However, it should be noted that other people still have a right of private action under the Act. In such a case other doctors (including those that do not want to be part of an agreement to bulk bill), could take court action against such an arrangement.
To ensure that there is no risk of breaching the price fixing law, even regarding collective agreements to bulk bill, each separate entity should independently decide on what fees to charge its patients.
Until 10 January 2007, general practitioners who are members of the same associateship or the same partnership with at least one corporate partner, can, under certain conditions, agree on fees charged to patients, including agreeing to bulk bill patients. This is under an ACCC authorisation granted to the RACGP. See p. 4 for details.
For those doctors not covered by the general practitioner authorisation, protection from court action could be sought for conduct that may otherwise breach the price fixing law, when the conduct is in the public interest. The ACCC invites you to approach it if you are considering to make an agreement with other doctors to bulk bill patients. The ACCC can discuss with you whether protection from court action is needed, and can take you through the steps involved.
For further information on protection from court action see p. 13 of this leaflet.
Can doctors ever discuss fees without breaching the price fixing law?
As outlined above, doctors who practise through separate entities are considered competitors for the purposes of the Act. If they seek to agree on the fees they will charge patients, they risk breaching the price fixing law.
The question then arises, at what point do discussions about fees cross the line and become an illegal agreement, arrangement or understanding to set fees?
Generally speaking, the following would not typically be considered by the ACCC to be likely to breach the Act:
merely being aware of the fees that other doctors charge—it is normal commercial behaviour to know what your competitors charge
doctors practising through separate entities informing other doctors of the fees those entities have independently decided to charge, for the purpose of obtaining informed financial consent from patients
doctors practising through separate entities discussing economic factors, information or formulae that have been or will be used in independently determining their fees (based on their own individual costs and expected levels of profit). This type of discussion may sometimes occur at professional association meetings or conferences, in the context of discussions about the factors affecting an industry or profession
the fact that two or more doctors practising through separate entities happen to charge the same fee.
In contrast, the ACCC considers that the following would risk breaching the Act if a decision is made between doctors practising through separate entities to:
charge the same fee
charge different fees
increase or decrease fees
agree fees, regardless of whether the agreement is actually put into effect by some or all of the doctors.
Important note: the information provided here is intended to serve as a guide to doctors on what is, and is not acceptable when discussing fees with competing entities. However, it is very difficult to determine in advance at what point fee discussions will cross the line and become illegal price fixing behaviour. Doctors should therefore exercise serious caution when discussing fees with competing doctors.
Industry comparison—petrol retailers
Petrol retailers display fuel prices at the front of their service stations to enable their customers to make easy price comparisons between different suppliers. Often when one petrol retailer sees the price at the retailer across the road go up or down, he or she will adjust his or her price board to match the others’ increased or decreased price—this is not illegal price fixing. In fact, it is competition at work, even when the price is increased.
The price fixing line is crossed if the two retailers agree:
on the price at which they will sell petrol,
on the price at which they will not sell petrol,
how much to increase or decrease petrol prices.
It is also important to note that the line is crossed when an agreement is reached, regardless of whether it is actually put into effect.
Can doctors obtain informed financial consent from patients without breaching the price fixing law?
Patients should be given accurate details of the fees and any additional costs they are likely to incur. Whenever possible, recognising that this may not always be feasible or appropriate in emergency situations, information on costs should be provided before treatment begins to enable patients to give informed financial consent. This should include not only fees, but also all other likely charges and costs, such as specialist charges and rehabilitation costs.
To obtain informed financial consent from patients it may be necessary to know the fees charged by other doctors. Information can then be provided to patients regarding the fee(s) they will be required to pay when seeing other doctors.
Doctors who exchange fee information with competing entities to facilitate obtaining informed financial consent from patients, but who do not agree on what fees will be charged to patients, will not breach the Act.
It is again important to stress that mere awareness of what others charge does not breach the Act. Illegal price fixing will only occur when an agreement, arrangement or understanding has been reached between competing entities, on what fees will be charged.
Is compliance with a recommended fee schedule considered price fixing?
The Act prohibits ‘recommended’ fee schedules when they are likely to constitute an agreement, arrangement or understanding between separate entities to fix, control or maintain prices. For example, if a ‘recommended’ fee schedule is in fact understood to be the fee that everyone will charge, this is likely to be considered as price fixing.
Doctors and their various representative organisations should therefore exercise serious caution when considering the use of recommended fee schedules.
Doctors are permitted to advertise their fees. Advertising is supported by the ACCC as it promotes awareness by patients of prices for services and allows them to make informed decisions about services they may choose to purchase.
The law in relation to advertising states that information provided to patients about fees should not be misleading or deceptive.
For further information on fee advertising see the ACCC leaflet, Straight talking with your patients.
Is there any protection from court action for price fixing?
A process exists under the Act for the ACCC to grant protection (‘authorisation’) from court action for anti-competitive conduct where those proposing to engage in that conduct demonstrate to the ACCC that the conduct is in the public interest.
The ACCC is required to undertake a rigorous analysis of the conduct in deciding whether it is in the public interest. The Act sets out a transparent public consultation process which the ACCC must follow.
The ACCC invites you to approach it if you are considering applying for authorisation. The ACCC can help you through the steps involved and identify the relevant information you need to include in your application.
An example of a relevant ACCC authorisation decision in this context is an authorisation granted to the RACGP which permits price fixing between general practitioners in certain circumstances.
Further information about the RACGP authorisation decision, and about the ACCC’s authorisation process is available at www.accc.gov.au or by calling the ACCC infocentre (1300 302 502).
ACCC Australian Competition and Consumer Commission
the Act Trade Practices Act 1974 (Cwlth)
anti-competitive conduct conduct prohibited by Part IV of the Act (or the competition codes of the states), specifically agreements between competitors (including professionals) to inhibit other competitors, fix prices and divide customers between them—Part IV also prohibits the misuse of market power, exclusive dealing, resale price maintenance and anti-competitive mergers and acquisitions
exclusionary agreement an agreement between competitors, including professionals, containing a provision which has the purpose of preventing, restricting or limiting the supply of services by parties to the agreement
RACGP Royal Australian College of General Practitioners
This ACCC publication was developed in consultation with the Health Services Advisory Committee (HSAC). The Australian Government established HSAC to promote consultation and the exchange of information between the ACCC and health professionals on matters relevant to the application of the Trade Practices Act.
The ACCC recognises the valuable contribution of the following HSAC member organisations and representatives. However, it is noted that this is an ACCC publication, the contents of which do not necessarily reflect the views of the organisations or persons represented on HSAC.
Independent chair The Hon. Mr Tim Fischer
Australian College of Rural and Remote Medicine Professor Ian Wronski
Australian Consumers’ Association Mr Chris Field
Australian Divisions of General Practice Dr Robert Walters
Australian Medical Association Professor Kerryn Phelps
National Rural Health Alliance Ms Lesley Fitzpatrick
The Royal Australian College of General Practitioners Dr David Thompson
Rural Doctors Association of Australia Dr Ken Mackey
Trade practices solicitor and barrister Mr Alan Limbury
