Feedback sought on proposed commitments in labs merger

Watchdog to assess if PAH's four pledges sufficiently assuage competition concerns

The Competition and Consumer Commission of Singapore (CCCS) is inviting the public to give feedback on the two-year commitments proposed by Pathology Asia Holdings (PAH) to address competition concerns in the planned merger of two private clinical laboratories.

PAH, which is a part of private investment firm TPG Capital Asia, intends to integrate the businesses of the two labs here - Innovative Diagnostics and Quest Laboratories - after acquiring them last year.

Both labs provide in-vitro diagnostic (IVD) tests which are used to detect diseases or other conditions and monitor a person's health, CCCS said yesterday.

The public consultation will run until July 5. The feedback collected will help CCCS assess whether PAH's four commitments will sufficiently address the competition concerns arising from the merger.

These commitments centre on IVD testing, exclusivity, allowing early termination of contracts and prices offered by the merged entity.

The firm said it is making the commitments even though it believes the merger does not result in substantially reducing competition in any market in Singapore.

The feedback collected will help CCCS assess whether PAH's four commitments will sufficiently address the competition concerns arising from the merger. These commitments centre on IVD testing, exclusivity, allowing early termination of contracts and prices offered by the merged entity.

PAH's first commitment is to ensure that other competing labs have access to the third-party IVD testing services supplied by Innovative and Quest at fair prices and acceptable service standards. Competing labs sometimes lack the scale to perform certain tests in-house, which means they need to send out these tests to third-party labs.

The firm said it will also allow contracted customers of Innovative and Quest to switch to other suppliers of IVD tests. This gives an incentive for competing labs to expand the volume and range of tests supplied.

PAH is also committing to allow early termination of contracts without cause so customers can more easily switch to other labs.

Lastly, the merged entity is committed to maintaining current prices for two types of customers: private hospitals which do not operate their own in-house labs and health-screening companies.

PAH said it will maintain the existing terms of its contracts with these customers, which generally need high volumes of IVD tests and have other requirements that can be met only by Innovative and Quest.

It has proposed that the commitments be in effect for two years from the date of CCCS's final decision on the merger.

Customers and other competitors had earlier given feedback that there might not be enough competition after the two labs are merged, during CCCS's first quick assessment of the deal.

In the in-depth second stage of the review, which began in November last year, the watchdog found that customers generally perceived the two labs as the closest competitor to each other as they are major providers of IVD tests here.

There was also third-party feedback which reiterated concerns that other IVD test providers - such as private hospital clinical labs and other private labs - may not be able to exert sufficient competitive constraint on the merged entity, CCCS said.

A version of this article appeared in the print edition of The Straits Times on June 22, 2019, with the headline 'Feedback sought on proposed commitments in labs merger'. Print Edition | Subscribe