Court penalises surgeons $110,000 for moves to prevent competition

The Federal Court has imposed penalties totalling $110,000 on two Adelaide cardiothoracic surgeons over moves to prevent competition from two other cardiothoracic surgeons in the Adelaide metropolitan area.

The Australian Competition and Consumer Commission had instituted proceedings alleging that Mr John Knight and Mr Iain Ross engaged in anticompetitive conduct over the provision of cardiothoracic surgical services to private patients in or near South Australia. 

The Federal Court today declared that on or around 6 February 2001 Mr Knight and Mr Ross made an arrangement that they would hinder or prevent a newly qualified surgeon from entering or supplying his services in the market before he had undertaken further surgical training, notwithstanding that he was legally qualified to practise as a cardiothoracic surgeon. 

The court also declared that Mr Knight and Mr Ross gave effect to the arrangement on six occasions between 6 February 2001 and 9 March 2001 by advising either hospitals at which the surgeon sought to operate, or cardiothoracic surgeons who had been asked to support the surgeon's applications to operate at those hospitals, that the surgeon was insufficiently trained, or had not completed his training, and should not be allowed to operate at those hospitals. The ACCC maintains this is not the case. 

The court also declared that Mr Ross attempted via a letter in May 2003, to reach a non-compete arrangement with a second surgeon whereby that surgeon would not provide surgical services at Ashford Hospital and that Mr Ross would agree not to provide surgical services at Wakefield Hospital. The court also declared that Mr Knight attempted, via a letter in November 2004, to reach a similar non-compete arrangement with the surgeon.
 
The court ordered Mr Knight and Mr Ross to each pay a pecuniary penalty of $55,000 and make a contribution of $5,000 each to the ACCC's costs in relation to the proceedings. Mr Knight and Mr Ross are also required to attend trade practices law compliance training.

"This is a reminder to all professions, not just the medical profession, that the Trade Practices Act or the relevant state Competition Code applies to their actions," ACCC Chairman, Mr Graeme Samuel, said today.

"With respect to the newly qualified surgeon, the conduct of Mr Knight and Mr Ross went beyond merely expressing a view as to what further training was, in their opinion, desirable for newly qualified surgeons. Their conduct went to the base of effective competition between medical professionals. It concerned the ability of newly qualified practitioners to enter the market unimpeded and the ability of practitioners to apply for accreditation at private hospitals of their choice. 

"The effect of the conduct was, in relation to the newly qualified surgeon, to hinder him from gaining access to Ashford Hospital for a period of time. It was also to signal to other newly qualified surgeons that they were required to undertake more training before they could practice as a surgeon.

"Additionally, they attempted to deter a rival surgeon from gaining access to Ashford where they had their practices."

The proceedings were finalised by consent.

Background

Competition Code

The Competition Code of South Australia is a South Australian law which forms a part of a single National Competition Policy that applies across Australia.  Under the Trade Practices Act 1974, the ACCC is often restricted to instituting proceedings against corporations for anti-competitive conduct; under the Code, the ACCC can institute proceedings for such conduct directly against individuals.

Section 45 of the Competition Code prohibits individuals from making a contract or arrangement, or arriving at an understanding, if a provision for the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition.  Section 45 also prohibits giving effect to such contracts, arrangements or understandings. 

Training

Cardiothoracic surgeons are required to be Fellows of the Royal Australasian College of Surgeons to be entitled to perform cardiothoracic surgery in Australia.  Advanced surgical training in cardiothoracic surgery is a six year program, requiring a surgeon to have first successfully completed a two year basic surgical training to be eligible to undertake advanced training.  Trainees complete their training under the supervision of RACS approved supervisors.

In February 2001, the newly qualified surgeon informed Mr Knight and Mr Ross that he was not going to do an overseas placement as had been proposed by Mr Knight, but was instead going to commence offering cardiothoracic surgical services, specialising in thoracic surgical services, to private patients in Adelaide. The surgeon had trained under the supervision of Mr Knight and Mr Ross during his final year of advanced surgical training.  Mr Knight, as his official RACS supervisor, had provided positive assessments of the surgeon to RACS, including that he had impressive operative technique and would make an excellent surgeon in the future.

After the surgeon told Mr Knight and Mr Ross of his intentions, Mr Knight and Mr Ross made an arrangement to hinder or prevent the surgeon from entering or supplying his services in the market prior to him undertaking further cardiothoracic surgical training, notwithstanding that he was legally qualified as a cardiothoracic surgeon. 

Accreditation

There are five hospitals in Adelaide which perform cardiac surgery, two public hospitals, the Royal Adelaide Hospital and Flinders Medical Centre, and three private hospitals, Ashford Hospital, Flinders Private Hospital and Wakefield Hospital. To be able to admit and treat patients at a private hospital, a cardiothoracic surgeon must obtain accreditation from that hospital. 

In mid March 2003, a surgeon who had an appointment at the Royal Adelaide applied for accreditation at Ashford. After becoming aware of his application, on 5 May 2003 Mr Ross wrote to the surgeon. In the letter Mr Ross asked the surgeon to reconsider his decision to operate at Ashford, invited him to enter into a non-compete arrangement, and threatened that he and Mr Knight would seek to operate at Wakefield unless the surgeon agreed not to compete with them at Ashford. 

The following year, on 23 November 2004, Mr Knight wrote to the same surgeon and advised it was his belief that the surgeon's decision to go to Ashford was disruptive to well established practice patterns in Adelaide and was expressly against the wishes of Messrs Knight and Ross. Mr Knight also invited the surgeon to become a party to a non-compete arrangement.

At the time of the conduct, only cardiothoracic surgeons who held an appointment at the Royal Adelaide provided cardiac surgical services at Wakefield Hospital and only cardiothoracic surgeons who held an appointment at the Flinders Medical Centre provided cardiac surgical services at Ashford. Mr Knight and Mr Ross held appointments at the Flinders Medical Centre.