Creeping mergers – should we be concerned? A case study of hospital mergers in South Africa

Creeping mergers are often cited as a problem in the context of concentrated industries, but practical competition law solutions are rarely suggested. Concern typically arises from a series of mergers which increase concentration in an industry but which do not individually cause substantial anti-competitive effects, particularly where the acquisitions are undertaken by a dominant firm. In South Africa it has been suggested in several industries that creeping mergers could be a competition concern; these include retail, media and healthcare to name just three. Under the South African Competition Act, however, there is no means to tackle such a problem. This paper attempts to weigh up the possible options for dealing with this issue. It first discusses the theoretical and practical considerations related to controlling creeping mergers before reviewing international experience. Next it presents a case study of the South African private hospital market, where the creeping merger problem is often suggested to be contributing to above-inflation increases in the cost of private healthcare. The paper finds that whilst it may seem attractive to regulate creeping mergers more strictly, there are a number of theoretical and practical considerations to be taken into account. These difficulties notwithstanding, in the private hospital market the analysis suggests that a creeping merger rule may have prevented some of the concentration which has occurred in the sector.