Federal Court imposes penalties, costs of $285,000 on AMA (W.A.), executive officers for price-fixing, primary boycott

In a landmark judgment the Federal Court has now ordered the Australian Medical Association (WA branch) and two officers to pay penalties and costs of $285,000 for price-fixing and primary boycott breaches.

The Australian Competition and Consumer Commission-initiated legal action relates to the supply of medical services to Joondalup Health Campus, in Perth, Western Australia. Joondalup is controlled by Mayne Nickless Ltd (trading as Health Care of Australia).

The AMA officers are its Executive Director, Mr Paul Boyatzis, and a former President, Dr David Roberts.

"This is the first time the Federal Court has imposed penalties on a professional association for price-fixing and primary boycott conduct in breach of the Trade Practices Act 1974”, ACCC Chairman, Professor Allan Fels, said today.

After considering joint submissions from the ACCC and the AMA(WA), Dr Roberts and Mr Boyatzis, the court was satisfied that the AMA(WA) had engaged in price fixing and primary boycott conduct over supplying medical services by visiting doctors to Mayne Nickless Limited for the care of Joondalup public patients. It ordered that the AMA(WA) pay a pecuniary penalty of $240,000.

The court also stated that it was satisfied that Mr Boyatzis, as Executive Director, and Dr Roberts, in his former capacity as President of the AMA(WA), were each knowingly concerned in the AMA(WA)'s contraventions. Each was ordered to pay a pecuniary penalty of $10,000.

Justice Carr, by consent, restrained the AMA(WA), Mr Boyatzis and Dr Roberts from engaging in similar conduct in the future. He required the AMA(WA) to institute and maintain a trade practices law compliance program and to contribute $25,000 toward the ACCC's legal costs.

In the joint submissions to the court the AMA(WA) admitted that:

• from December 1995 to February 1997, on behalf of doctors at the new Joondalup hospital, it negotiated with Mayne Nickless on the terms and conditions under which visiting doctors would care for Joondalup public patients;
• in December 1996, at a late stage in those negotiations, it advised Mayne Nickless that the doctors had agreed to take whatever action was necessary to conclude the negotiations and that the AMA(WA) would cause the doctors to withdraw their services and discharge their patients from Joondalup unless agreement on the terms and conditions of their engagement was reached, in breach of the Act's primary boycott provisions;
• by negotiating on the doctors behalf, the AMA(WA) arrived at, and gave effect to, an understanding to fix prices for the medical services supplied by doctors to Joondalup public patients; and
• it arrived at, and gave effect to, an understanding which substantially lessened competition in the supply of medical services by doctors to non-teaching hospitals for the care of public patients in WA.

Mr Boyatzis and Dr Roberts also admitted that they played key roles in the AMA(WA)'s conduct.

"Joondalup, a privately owned and operated hospital offering both public and private patient services site, was the first such 'health campus' in WA. As such, it provided an opportunity for the hospital operator to individually negotiate fees with doctors who wanted to provide services to the hospital's public patients. The agreement forged by the AMA(WA) on behalf of doctors prevented this from occurring.

"The court's decision sends a clear message to the medical professional and its associations that they are not above the law. As the facts of this case show, the issues involved are not about ethical obligations of the professions or standards or quality of medical treatment. The issues are about the collective use of market power to increase doctors' incomes or shield them from competitive forces.

"All Australian parliaments enacted laws in 1995 to ensure the universal application of the competition provision of the Trade Practices Act to unincorporated businesses, including the professions. The ACCC will continue to enforce the law without fear or favour to all sectors of the Australian economy.

"By preventing the potential for price competition to occur between the doctors wanting to provide medical services to the hospital's public patients, any prospect of lower payment levels being negotiated with particular doctors was effectively lost.

"The understanding to fix prices may have inflated the cost of providing public patient care at Joondalup, potentially adding an unnecessary burden to public health care funding. The understanding to fix prices also had the potential 'knock-on' effect of setting benchmark fees for medical services by any future private hospital operators providing public patient care. That is, it would be likely that any future private hospital operator in WA would be required to pay visiting doctors on the same terms as those negotiated by the AMA(WA) at Joondalup. This had the potential of depriving the WA public of the benefits of price competition and, therefore, lower public health costs".

Professor Fels said the ACCC was particularly concerned that as President of AMA(WA) Dr Roberts had taken part in a conference, Can the professions survive under a national competition policy?, organised in April 1997 by the ACCC and three universities to inform the professions about the competition law's application to the professions, which was at about the same time the conduct found by the court to be unlawful occurred.

"Competition law extends to everyone carrying on a business, whether incorporated or not, including those in the professions such as doctors, lawyers and architects. If a doctor chooses to work as an independent or sole practitioner then his/her business decisions of setting fees or negotiating contracts must be made on an independent basis, not by agreement with competitors".

The ACCC acknowledges that the AMA(WA)'s, Mr Boyatzis' and Dr Roberts' agreement to the court orders helped achieve a timely and effective outcome to the action, saving the cost to both private and public resources of protracted and costly litigation.

Justice Carr noted that "the maximum pecuniary penalty which could be ordered against the first respondent is $10 million, and against each of the third and fourth respondents the maximum would be $500,000. The proposed penalties can be seen to be at the lower end of the scale".

The ACCC's proceedings continue against the remaining parties to the proceedings, Mayne Nickless Ltd, former General Manager (Western Australia and Asia) of Health Care of Australia (a division of Mayne Nickless), Mr Martin Day, and former Joondalup Chief Executive, Mr Ian MacDonald, who are defending the case.