Bundeskartellamt prohibits for the first time merger between public hospitals

The Bundeskartellamt has prohibited the University Hospital of Greifswald from taking over the Wolgast district hospital. The University Hospital of Greifswald – a public law institution – has fifteen specialised departments with a total of approx. 780 beds and is the only major provider of comprehensive hospital services within a large radius. The Greifswald hospital is financed by the federal state of Mecklenburg-Western Pomerania which operates another university hospital with approx. 1070 beds in Rostock. The Wolgast district hospital has five specialised departments with a total of 180 beds.

The Bundeskartellamt has defined the market for acute hospitals as the relevant product market. It comprises all general hospitals and specialised clinics; rehabilitation and other nursing centres are not covered by the market definition.

The geographic market has been defined as the “Greifswald” market, which from the patients’ view, determined through empirical surveys of patient behaviour, comprises three postal code areas (Greifswald, Wolgast and Usedom). The geographic market definition was based on a comprehensive survey at all hospitals in Mecklenburg-Western Pomerania and several larger hospitals and hospital groups in neighbouring federal states. In the territory covered by the survey more than 250,000 cases were treated in 2005.

The merger would have further strengthened the dominant position of the Greifswald University Hospital. In the “Greifswald” market, market shares would have increased by approx. 25 % to approx. 80% of the overall market and, with regard to individual specialised departments such as surgery, obstetrics and gynaecology, paediatrics and otorhinolaryngology, in some cases to approx. more than 90%.

The federal state of Mecklenburg-Western Pomerania has argued that its total turnover does not exceed the turnover threshold of 500 Mio € and that a prohibition of the merger would restrict the constitutionally protected freedom of research and teaching (Art. 5 (3) of the Basic Law). The Bundeskartellamt does not agree with this assessment. Firstly, the total turnover achieved by the federal state not only includes turnover achieved by its university hospitals but also all turnover achieved through other commercial activities of the state. Secondly, the Bundeskartellamt is unable to conceive how its prohibition decision could represent a violation of the freedom of research and teaching. It has been confirmed by the highest courts that the exercise of a constitutionally protected right, such as the right of local self-administration, also has to move within the sphere of general law.

The President of the Bundeskartellamt, Dr Ulf Böge, stated: „All entrepreneurial activity, and this includes entrepreneurial activities of the public sector, is subject to the Act against Restraints of Competition (ARC). Under the Act a merger cannot be cleared if it would lead to the creation of a dominant position. In the present case this is exactly what would happen. We cannot allow the public sector to realise projects which we prohibit for the private sector. This is even more so where the state is active in markets in which it competes with private companies.”

The decision is not yet final. The parties involved can appeal against this decision at the Düsseldorf Higher Regional Court. The decision will soon be available on the Internet at www.bundeskartellamt.de.