The ACCC has filed proceedings in the Federal Court seeking an urgent injunction to stop the proposed completion of Virtus Health’s acquisition of Adora Fertility from Healius Limited .
Virtus and Adora are leading providers of IVF services. Both companies operate fertility clinics in Brisbane, Sydney and Melbourne.
Virtus notified the ACCC of its intention to acquire Adora Fertility on 30 August 2021 and provided very limited information to the ACCC. On 21 September, after notifying Virtus that it had concluded that it was not possible to grant the early merger clearance, the ACCC commenced a public review of the transaction. Last week, the merger parties notified the ACCC that the parties proposed to complete the transaction this Friday, 15 October 2021, even though the ACCC’s review will not have been completed.
“It is extremely disappointing to see parties moving to complete an acquisition involving competing businesses such as this while knowing there has been inadequate time for appropriate regulatory scrutiny. By proceeding with the transaction while the ACCC is in the very early stages of a public review, the parties have shown complete disregard for the usual merger assessment processes in Australia,” ACCC Chair Rod Sims said.
The acquisition would increase Virtus’ already significant market share in Brisbane and Melbourne. Concerns may also arise in relation to the change in market shares in Sydney. In addition to the apparent increase in market concentration, there are strong indications that Adora has been a vigorous competitor, driving down prices for IVF services through a low-cost model.
“Fertility treatment is an expensive and difficult process. A reduction in competition is likely to result in increased IVF prices, adding to the financial impact on consumers seeking to fulfil their wish for having children,” Mr Sims said.
“Seeking an urgent injunction to restrain completion of a transaction is a significant step for the ACCC to take but was required in these circumstances where the parties have not been prepared to allow the ACCC adequate time to finalise its merger review.”
Virtus offered the ACCC a temporary ‘hold separate’ undertaking proposal under which Virtus would acquire Adora but would commit to take some steps to keep the Adora business separate from the Virtus business.
“The ACCC considers that there are no compelling reasons other than commercial convenience for the transaction to proceed at this time. Any hold separate undertaking is an inferior option, and in this case the undertaking proposed by Virtus was inadequate and was unlikely to have been effective in maintaining Adora as a vigorous and effective competitor,” Mr Sims said.
Virtus’ move to complete the acquisition ahead of the ACCC completing its review comes soon after Mr Sims’ recent Law Council of Australia speech about the need for reforms to the merger regime in Australia.
“Situations like this demonstrate why we believe Australia needs a formal merger regime, under which companies cannot complete transactions which raise potential competition issues before they allow adequate time for ACCC approval,” Mr Sims said.
More information on the ACCC’s public review can be found here: Virtus Health Limited – Adora Fertility and three day hospitals from Healius Limited
Virtus an ASX-listed global provider of fertility services. In Australia, Virtus operates full service fertility clinics branded as:
- IVF Australia (NSW)
- Melbourne IVF (VIC)
- Queensland Fertility Group (QLD)
Virtus also operates low cost clinics branded as The Fertility Centre in Brisbane, Melbourne, Liverpool, Wollongong and the Gold Coast.
Adora is owned by the healthcare company Healius. Adora operates four fertility clinics located in Brisbane, Sydney, Melbourne and Perth.
Under section 80 of the Competition and Consumer Act, the ACCC may seek injunctive relief from the Federal Court to prevent a merger from proceeding.
‘Early merger clearance’ refers to an initial assessment made that there is a low risk of a merger substantially lessening competition, and therefore that it is not necessary for the ACCC to conduct a public review of that merger.
A ‘hold separate’ undertaking refers to an undertaking where an acquirer commits to maintain an acquired business separately from the rest of its business for a specified period. These undertakings are difficult to monitor and the ACCC typically requires rigorous controls around them, including appointment of an independent manager and strict rules around access to sensitive information.