ACCC v IVF Finance Pty Ltd

Facts and summary

The ACCC made urgent application for interlocutory injunction to restrain the first respondent (IVF Finance) from acquiring a fertility business (Adora Fertility) from the second respondent (Healius), alleging such an acquisition would contravene s 50 of the CCA.

Justice O’Bryan granted the interlocutory injunction. Before the substantive matter was determined, Virtus Health, the parent company of the first respondent, indicated it had abandoned its proposed acquisition. The ACCC subsequently discontinued proceedings.

The ACCC had been in the process of reviewing the merger under its informal process when Virtus announced it intended to complete the acquisition even though the review was ongoing. See ACCC public merger review page.

ACCC media release 157/21

ACCC seeks urgent injunction to halt Virtus acquiring Adora fertility clinics
13 October 2021

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 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

Background

Virtus is 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.

Notes to editors

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.” 

Discontinuation

ACCC media release 217/21

Virtus abandons proposed acquisition of Adora

17 December 2021

The ACCC is likely to seek to discontinue its proceedings in the Federal Court in relation to Virtus Health’s (Virtus) proposed acquisition of Adora Fertility (Adora) from Healius, after Virtus announced today that it has decided not to proceed with the acquisition.

Virtus originally informed the ACCC of its intention to acquire Adora in August 2021 but later advised that it would complete the transaction even though the ACCC had not completed its informal review of competition issues raised by the acquisition.

On 25 October 2021, the Federal Court granted the ACCC an interlocutory injunction to restrain Virtus Health from completing its acquisition of Adora Fertility until proceedings brought by the ACCC were finalised, or the Court made other orders.

“This was an important decision and sent a powerful message to potential merger parties in Australia,” ACCC Chair Rod Sims said.

“The ACCC will not hesitate to take appropriate action in the Federal Court to prevent completion of a transaction if it is concerned that the transaction is likely to substantially lessen competition. Proposing to proceed with a transaction without informal clearance from the ACCC, as Virtus did in this matter, unnecessarily exposes merger parties to significant legal and commercial risks.”

The ACCC was concerned that the acquisition would increase Virtus’ already significant market share in Brisbane and Melbourne. There were also strong indications that Adora has been a vigorous competitor, driving down prices for IVF services through a low-cost model.

“Competition is vital for protecting consumer access and choice. Fertility treatment is already a costly and difficult process for would-be parents. When there are fewer IVF providers, there is a significant risk the cost of IVF treatment will increase, adding further to the financial impact on consumers,” Mr Sims said.

Background

Virtus and Adora are both 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.  Within a short time after Virtus provided its courtesy notification to the ACCC, Virtus was advised that a public review would be required. This was commenced on 21 September once we had received the information from Virtus necessary to conduct the review.  In early October, the merger parties notified the ACCC that the parties proposed to complete the transaction on Friday, 15 October 2021, even though the ACCC’s review would not have been completed.

On 13 October, the ACCC commenced proceedings and sought an urgent injunction to restrain Virtus from acquiring Adora Fertility and three day hospitals from Healius.

On 14 October, the Federal Court granted the ACCC an interim injunction which prevented the transaction from proceeding as planned on 15 October. The interim injunction was extended on 19 October after the hearing of the ACCC’s application for an interlocutory injunction. On 25 October, the Court granted an interlocutory injunction.

Notes to editors

Section 50 of the Competition and Consumer Act prohibits mergers or acquisition that will have the effect, or be likely to have the effect, of substantially lessening competition in any market.

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.