ACCC wins court fight with healthcare company over “bundling” of products

The Australian Competition and Consumer Commission has warned businesses that bundle products and services to make sure their offering is not designed to snuff out competition.

The Australian Competition and Consumer Commission has warned businesses that bundle products and services to make sure their offering is not designed to snuff out competition.

The warning comes after the Federal Court found Baxter Healthcare breached the misuse of market power and the exclusive dealing provisions of the Trade Practices Act 1974 in the way it structured long term-contracts related to bundling the supply of sterile fluids with peritoneal dialysis products used by people with kidney failure.

Baxter, which is the sole supplier of sterile fluids in Australia, entered into long-term contracts with health purchasing authorities in NSW, Queensland, South Australia, and Western Australia that required the authorities to also purchase peritoneal dialysis products (a market in which Baxter faced competition) if they wished to have the benefit of significantly lower sterile fluids prices.

Federal Court judge Justice Gyles found “Baxter used its market power in the sterile fluids market to achieve exclusive dealing by means of bundling to endeavour to snuff out competition as it threatened in the PD fluids market”.

The court is yet to consider penalties against Baxter.

Bundling is used in a range of industries, although it is common in the utilities sectors and telecommunications, where companies often bundle home and mobile phone products with internet services.

ACCC chairman Graeme Samuel said his organsiation took action against Baxter following a complaint from a medical practitioner and warned that companies must not use bundling to lessen competition.

“While bundling of itself is not necessarily a problem, companies need to be careful when bundling the supply of their products, to seek an advantage over their competitors, that they do not fall foul of misuse of market power and exclusive dealing provisions of the act,” Samuel says.

“Baxter has said that it was only responding to tenders as sought by various governments, but let me be clear, it was Baxter’s purpose to deter or prevent competitors from being competitive by its bundling strategy and to lessen competition. And it’s not to be forgotten that this did lessen competition.”

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