Bundeskartellamt prohibits merger between municipal hospitals in Hessen

The Bundeskartellamt has prohibited Gesundheit Nordhessen Holding from acquiring Gesundheitsholding Werra-Meißner. The holding company Gesundheit Nordhessen Holding, in which the city of Kassel and Kassel administrative district have an interest, operates six hospitals in greater Kassel with approx. 1,700 beds, among them the clinical centre in Kassel. The holding company Gesundheitsholding Werra-Meißner, which is owned by the Werra-Meißner administrative district, owns two hospitals with a total of approx. 500 beds in Eschwege and Witzenhausen.

In line with its current practice, the Bundeskartellamt has defined a product market for acute hospitals. This comprises all general hospitals and specialised clinics, excluding rehabilitation and other nursing centres.

The Bundeskartellamt has defined the geographic market as the regional market of Werra-Meißner district (consisting of the two postcode areas Witzenhausen and Eschwege). The geographic market definition was based on findings from an extensive survey of patient flows conducted at approx. 100 hospitals within a wide radius around the locations of the hospitals of the parties to the merger.
The merger would have strengthened the dominant position of Gesundheitsholding Werra-Meißner on the market affected. Its market shares would have increased to approx. 62.5 % as a result of the merger. Apart from the high market share, the range of health care services provided by Gesundheit Nordhessen Holding, which is clearly superior of that of its other competitors, constituted another strengthening effect. In the course of the market investigations several rival hospitals criticized the merger plans.

The parties to the project argued that the relevant geographic market was much larger and that its definition should encompass a wider area than the Werra-Meißner district, taking in other areas (mainly greater Kassel and the surrounding areas). However, the investigations revealed that the merger would have led to a dominant position of the parties even if such a wider market definition were applied.

The Bundeskartellamt could not follow the parties' argument that an improvement in competition conditions could be expected from the merger, which would outweigh the disadvantages of dominance. Ultimately, in the Bundeskartellamt’s view the commitment proposals submitted by the parties were not adequate to rule out the negative impact the merger would have on the market structure.

President Dr Bernhard Heitzer stated: “All entrepreneurial activity, and this includes entrepreneurial activities of the public sector, is subject to the Act against Restraints of Competition (ARC). According to the law a merger has to be prohibited if, as in the case in question, it would create or strengthen a dominant position. There are no special rules for economic activities of the public sector. The importance of this principle is all the more evident where the state is active in markets in which it competes with private companies.”

The decision is not yet final. The parties have the opportunity to appeal.