CFTC slaps Mwaiwathu Private Hospital with a K19.7m fine over unfair trading practices

Competition and Fair Trading Commission (CFTC), a State-funded body mandated to regulate, monitor, control and prevent acts or behaviours which would adversely affect competition and fair trading in Malawi, has slapped Mwaiwathu Private Hospital Limited with a K19,743,660.00 fine for breaching competition and fair trading laws.

The fine follows a complaint MedHealth Limited lodged at the Commission, stating that the private health facility was involved in unfair trading practices in the way it handled its health insurance.

Specifically, Medhealth Limited complained that the rates that Mwaiwathu charged were around 50 to 300 higher than the rates they charge Medical Aid Society of Malawi (MASM) members for the same services.

The complainant cited the example of pediatrician consultation fee, which is pegged at MK 15,000 for MASM members and K47, 230 for clients of other health insurance companies.

MedHealth further disclosed that Mwaiwathu is behaving like that because the institution holds 34 percent shares in Mwaiwathu and this is the reason they charge MASM lower rates to give them a competitive edge over competing health insurance.

For this reason, the complainant argued that the conduct is anti-competitive. This prompted the Commission to launch investigations against Mwaiwathu Private Hospital, which established that the facility indeed contravened the provisions of Competition and Fair Trading Act (CAP) 48:09 of the Laws of Malawi.

“In view of the findings made during the investigations on this matter, the Board of Commissioners issued the following orders:

(1) That Mwaiwathu Private Hospital Limited should cease and desist from offering discriminatory discount rates to health insurance providers.

(2) That Mwaiwathu Private Hospital Limited should review its discount system and ensure that the qualification criteria is transparent and does not unduly discriminate against any health insurance company and because of this , Mwaiwathu Private Hospital Limited should pay a fine of K19,743,660.00 being financial gain generated from engaging in the is criminatory billing of services across medical insurance schemes,” reads the judgement in part.

The Commission says the fine was calculated based on the number of MedHealth members (5,773) that visited Mwaiwathu Private Hospital from 2012 to 2017 who were assumed to have accessed the cheapest service of full blood count at the rate of K6, 900 per member versus a MASM member, who accessed the same service at MK3,480 per member, which gave a discrepancy of MK3,420 per MedHealth member.

“Thus, the total generated gain is calculated as 5,773 x MK3,480 =MK19,743,660.00,” says the Commission.

Mwaiwathu is a private medical service while MedHealth is a health insurance provider. It is also believed that access to Mwaiwathu being a specialized hospital is considered by health insurance company as a factor that determines their competitiveness and that the favourable treatment that Mwaiwathu gives to MASM has the effect of influencing subscribers to move away from other insurance companies and join MASM.

“In this regard, the discounts that the Respondent gives to MASM has the effect of unduly restraining competition between MASM and other health insurance companies and MedHealth in particular. In light of the above analysis, it is concluded that the discounts given to MASM by Mwaiwathu constitute a contravention of Section 32(2) (6) of the CFTA,” reads the report.

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