The Belgian Competition Authority has declared itself competent to examine mergers and acquisitions between hospitals under its merger control regime, following the Act of 29 March 2021

A lot of uncertainty has existed about the requirement for hospitals to notify M&A transactions to the Belgian Competition Authority (“BCA”). On 28 June 2023, the BCA decided to partially lift the stand-still obligation regarding a concentration between two hospitals, and it further clarified the applicable rules in a follow-up Communication of 14 July 2023.

Background

In 2019, uncertainty about the applicability of the notification requirement for hospitals first arose. In February 2019, [1] a legislative amendment to the General Act of 2008 on Hospitals obliged hospitals to establish and be part of a loco-regional hospital network (locoregionaal ziekenhuisnetwerk/reseau hospitalier locorégional) as from 1 January 2020. A loco-regional hospital network is defined as a “long-term, legally formalised cooperation with legal personality (…), between at least two non-psychiatric hospitals that are separately recognised at the time of the creation of the local hospital network (…), which are located within a geographically contiguous area and which offer complementary and rational locoregional care assignments”.

The legislative reform’s preparatory works stressed that the establishment of loco-regional hospital networks would be aimed at maintaining long-term qualitative, accessible and affordable care and that collaboration between hospitals would improve the coordination of care for patient benefit.

Following this amendment, the BCA received some questions regarding the applicability of the merger control rules to concentrations under the newly-updated hospital legislation. Consequently, the BCA issued a note in July 2020 in which it clarified that the creation of regional clinical hospital networks could be caught by merger control rules if those concentrations met the normal notification thresholds. In that note, the BCA also set out the principles that it would use when assessing the establishment of hospital networks and their possible qualification as concentrations under competition law.

However, in an attempt to prevent delays in implementing the 2019 reform to the General Act of 2008 on Hospitals, the Belgian legislator overturned that BCA opinion with another legislative act, the Act of 29 March 2021. ^[2] Through that act, the Belgian legislator provided that the establishment of a loco-regional hospital network and any subsequent changes in its composition are not subject to prior merger control under Book IV, Title 1, Chapter 2 of the Code on Economic Law (“CEL”). In other words, the Act of 2021 exempted any establishment of loco regional hospital networks, even if it would qualify as a notifiable concentration in accordance with the CEL’s competition rules, from the obligation to be notified to and approved by the BCA.

The BCA’s decision of June 2023

On 31 May 2023, the BCA received notice of a proposed merger between two hospitals, the “Pôle hospitalier Jolimont” and the “Centre hospitalier universitaire et psychiatrique de Mons”. Due to the uncertainty regarding the application of the merger control rules to hospital mergers given, as described above, the different opinions and legislative acts, the parties for a long time in the concentration process believed that their concentration did not have to be notified. Therefore, they requested the BCA for a derogation from the so-called “standstill obligation”, i.e. the prohibition on implementing a concentration until the competition authority has authorised the concentration. Indeed, the parties claimed that they had to execute certain (planned) transactions before a notary and that without these documents the merger could not take place on time, and that the respecting the standstill obligation would not allow the parties to continue with those legal steps in time.

The BCA considered that the request for a derogation from the standstill obligation arose from exceptional circumstances concerning the uncertainty surrounding the obligation to notify hospital mergers. The BCA found that the parties had believed in good faith that no notification was due, as (i) the Act of 28 February 2021 prescribes that the constitution of a hospital network is not subject to merger control; and (ii) according to the preparatory works of 2021, the Minister of Economic Affairs had suggested that a merger between members of the same hospital network would constitute an “internal restructuring”. Furthermore, the BCA considered that a partial lifting of the standstill obligation should not have a significant competitive effect as long as the parties undertook that no act of coordination or integration of hospital activities would be adopted and that they would not undertake any irreversible action. Consequently, under those conditions, the BCA decided to partially lift the stand-still obligation on the parties.

Comments

Different legislative acts and legal opinions have created a lot of uncertainty about the notification requirement for hospital concentrations in Belgium. In its decision of 28 June 2023, the BCA however did not elaborate on the applicability of the notification rules, noting that “[i]nsofar as the parties (like the Auditor) now consider that the merger is subject to merger control, the Assesseur Désigné does not need to express an opinion on the various possible interpretations of the applicability of merger control to hospital groupings within a network.”

As a follow-up to this decision, the BCA’s Executive Committee on 14 July 2023 published a Communication in which it explicitly confirmed its competence to examine mergers and acquisitions between hospitals under its merger control regime. That Communication first acknowledges that the Act of 29 March 2021 exempted from the BCA’s prior merger control “the creation of a local-regional clinical hospital network and any subsequent change in the composition thereof“. But then the Communication explicitly confirms that this exemption, however, does not extend to mergers and acquisitions between hospitals that are independent of the creation of such a loco regional hospital network or a change in the composition, even if the hospitals concerned are already part of the same hospital network. According to the BCA’s Executive Committee, these mergers and acquisitions are structural in nature and lead to a lasting change in the management of the supply of hospital services and are therefore notifiable transactions.

It should moreover be noted that the exemption in the Act of 29 March 2021 is in any case without prejudice to the application of the European merger control rules. Consequently, should the EU notification thresholds be exceeded by the hospitals concerned in the concentration, a notification at the European level would be required even for transactions that would come within the scope of the 2021 Act’s exemption. Therefore, hospitals should seek solid legal advice to verify whether the establishment of a new entity between hospitals must be notified to a competition authority (and whether it could benefit from the standstill obligation exemption). The BCA showed some leniency in its decision of June 2023 by partially lifting the standstill obligation due to the legal uncertainty concerning the notification rules for hospitals that still existed, but the BCA Communication also stressed that it is “currently handling a series of mergers and acquisitions in the hospital sector under its merger control regime, in accordance with the applicable legal framework and in full cooperation with the hospitals in question.” There might have been some uncertainty about the application of the notification rules for hospitals and therefore some leniency by the BCA, but now that things have been clarified one thing is certain: hospital M&A transactions are definitely  on the BCA’s ‘radar’.

[1] Act of 28 February 2019 amending the coordinated Act of 10 July 2008 on hospitals and other health care institutions, concerning clinical networks between hospitals, Official Gazette of 28 March 2019.

[2] Act of 21 March 2021 amending the coordinated Act of 10 July 2008 on hospitals and other health care institutions, concerning clinical networks between hospitals, Official Gazette of 16 April 2021.

Written by

• Beatrijs Gielen

  Counsel