In this article, we discuss the compliance advice given to the Royal Australian and New Zealand College of Ophthalmologists by the Commerce Commission following an investigation into a letter the College sent to its members. We also discuss how the Commerce Act applies to industry bodies generally, and provide guidance on what will be problematic conduct. 

Royal Australian and New Zealand College of Ophthalmologists warned

The Commerce Commission (the Commission) has issued compliance advice to the Royal Australian and New Zealand College of Ophthalmologists (RANZCO), the industry body responsible for the training and professional development of ophthalmologists (eye surgeons) in Australia and New Zealand.

Section 27 of the Commerce Act (the Act) prohibits any contracts, arrangements or understandings with the purpose or likely effect of substantially lessening competition in a market. The Act makes specific references to industry associations/bodies (such as RANZCO), stating that:

• A contract, arrangement or understanding by these associations is deemed to be entered into by its members; and
• A recommendation by these associations to their members is deemed to be an arrangement between the members, and between the association/body and its members.  

A common example of a substantial lessening of competition is where the contract, arrangement or understanding prevents prospective new entrants from competing in a market - this is referred to as “increasing barriers to entry”.

In 2022, the relevant legislation governing optometrists’ scope of practice was amended, giving them permission to start providing certain surgical ophthalmic procedures, provided they had received the necessary training from ophthalmologists.

The Commission’s investigation focused on whether a letter issued by RANZCO to its members, which appeared to advise them not to provide this training to optometrists, constituted an arrangement between the RANZCO members to prevent optometrists from competing with ophthalmologists for the provision of the relevant surgical procedures.

Such a recommendation would have consequences for optometrists (who would be prevented from performing these procedures), patients (who would have reduced choice of providers), and both public (Te Whatu Ora) and private (insurers) healthcare funders (which would be forced to fund procedures by ophthalmologists, likely to be more expensive than optometrists).

After the Commission raised concerns, RANZO issued another letter to its members, clarifying that it was not intending to encourage ophthalmologists to refuse to provide this training, and confirming that ophthalmologists would not face disciplinary action if they did. The Commission considered this to be appropriate mitigation, deeming compliance advice to be sufficient enforcement action.

Compliance advice letters are considered to be the lowest form of positive enforcement action the Commission can take. Generally, these letters will advise recipients on the risk of conduct breaching the Act and the penalties for doing so, and may also provide guidance on how to avoid future breaches. While no further enforcement action will be taken, the Commission notes that this does not necessarily mean the conduct would not have been found to breach the Act if further investigation had been carried out.

The Commission did not refer to cartel conduct in its compliance advice letter to RANZCO. In our view, this looks to be lenient - if the letter had been acted upon by RANZCO’s members, the practical effect of restricting availability of the relevant ophthalmic surgical procedures appears to be a textbook example of an arrangement between competitors to restrict output. In this context, we consider that RANZCO may have been lucky to avoid more serious enforcement action here, particularly given the potential for individuals to be found criminally liable for cartel conduct.

Previous breaches

Ophthalmologists have been in the Commission’s sights before. In 2004, the Ophthalmological Society of New Zealand and some of its members were fined for coming to an arrangement, whereby they refused to give two Australian doctors support (namely, pre and post-operative care for patients), that they needed to be able to provide certain ophthalmic procedures in Southland. This arrangement was held to have the purpose of protecting the existing practitioners’ business interests (particularly in the case of the main instigator).

Industry bodies and the Commerce Act

For the most part, industry bodies will benefit both their members and the public. Leading industry-wide initiatives, facilitating training programmes and other professional development, and establishing professional standards for their members to comply with, are just a few examples of the benefits that these associations can have.

However, industry bodies (and their members) need to exercise care when agreeing on any course of action that has competitive effects. Due to the deeming provisions in the Act, a recommendation by an industry body to its members to act in a certain way may well raise competition issues, particularly where the resulting conduct might have the effect of preventing certain competitors or prospective new entrants from competing with the industry body’s members.

While not a focus in the RANZCO case, industry bodies also need to ensure they do not facilitate cartel conduct between their members. Any agreement between members of an industry body with regard to common pricing, levels of output and/or market allocation (including whether or not to participate in bidding processes) will raise cartel issues under section 30 of the Act. Further, industry bodies have to be careful that they do not operate as a conduit for the sharing of competitively sensitive information between members.

Please feel free to get in touch with one of our experts to discuss any aspect of this article and its potential implications for you and/or your business, especially if you are part of an industry body.

Special thanks to Henry King for his assistance in preparing this article.