CMA clears medical devices merger unconditionally at Phase I
The UK Competition and Markets Authority has cleared Atos Medical's acquisition of Countrywide Supplies unconditionally at Phase I. Atos Medical is a Swedish manufacturer of medical appliances including in particular tracheostomy and laryngectomy products (with a market share of 80-90%). Countrywide Supplies is the most important UK dispensing appliance contractor (DAC) for these products (with a market share in the community channel of 70-80%), supplying devices to patients with an appropriate prescription.
We were involved in the assessment of vertical effects arising from the transaction, and in particular the scope for input foreclosure (Atos either discontinuing supply or worsening supply terms to competing DACs) and/or customer foreclosure (Countrywide either discontinuing supply or worsening distribution terms to competing appliance manufacturers). This relied on a detailed assessment of costs, margins (considering both manufacturer discounts and NHS dispensing fees at the supply level), the extent to which customers purchase bundles, and the role of price regulation.
The CMA concluded that the merged firm might have the ability and incentive to engage in the partial foreclosure of competing DACs, but that the impact on competition of any such action would be minimal, due to the limited level of competition imposed on Countrywide pre-merger and the regulation of prices. The CMA did not believe that the merged firm would have the ability or incentive to foreclose rival manufacturers.