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Singapore competition watchdog gives conditional nod to clinical labs merger

THE Competition and Consumer Commission of Singapore (CCCS) has granted conditional approval for the completed merger of two private clinical laboratories, after accepting four-year commitments from Pathology Asia Holdings (PAH).

PAH, a unit of private equity giant TPG Capital Asia, integrated the businesses of the two labs – Innovative Diagnostics and Quest Laboratories – after acquiring them last year.

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

Pre-merger, Innovative and Quest had been the closest competitors to each other, as they were the top two suppliers of IVD tests among private clinical labs in Singapore, CCCS said on Monday.

Earlier this year, the competition watchdog sought public feedback on the two-year commitments proposed by PAH to address competition concerns arising from the merger.

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During the public consultation, industry players and customers generally agreed that the four proposed commitments will achieve their objectives, but also identified some gaps in their sufficiency in addressing the competition concerns, CCCS said.

In response to the issues identified, PAH then submitted revised, final commitments, effective for four years from Oct 18.

On Monday, CCCS said that it greenlighted the merger because it found the final commitments sufficient to address the competition concerns, after evaluating third-party feedback and the revisions made by PAH.

This approval is conditional upon PAH implementing and complying with the final commitments.

PAH’s four final commitments relate to third-party IVD tests, exclusivity, early contract termination, and prices offered to customers.

The 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, reasonable and non-discriminatory prices, and at service standards consistent with those offered by the two labs to their direct non-contracted customers.

Competing labs sometimes need to send out certain tests to third-party labs if they lack the scale to perform them in-house.

Secondly, PAH is committing to allow contracted customers of Innovative and Quest to switch to other suppliers. The two labs will not lock in customers on an exclusive basis in any new contracts or existing contracts that are renewed, extended or rolled over after March 4.

PAH will also allow early termination of contracts without cause, subject to a prior written notice period.

This will enable customers to switch to other labs more easily, which is meant to encourage competing labs to offer a larger volume of tests and/or range of tests in order to increase competitive constraint on the merged entity over time.

Lastly, the merged entity will maintain its prices for two types of customers: private hospitals which do not operate their own in-house labs, as well as health-screening companies.

PAH is to individually notify all customers affected by the commitments, conduct an internal audit annually, and submit signed yearly compliance statements to CCCS.

If the watchdog has reasonable grounds for suspecting non-compliance with any of the final commitments, PAH will appoint a monitoring trustee to monitor the two labs’ compliance.

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