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(i) the names of the merger parties;
- Fresenius Medical Care Singapore Pte. Ltd. (“FMC SG”);
- RenalTeam Pte. Ltd. (“RT”)
(collectively, the "Parties", each a “Party”).
(ii) a description of the transaction;
The notification relates to the proposed acquisition by FMC SG of 100 per cent. of the issued share capital in RT (the “Proposed Transaction”).
(iii) a description of the business activities of the merger parties worldwide and in Singapore;
FMC SG
FMC SG is part of the FMC group of companies (“FMC Group”), which is in the business of providing dialysis products and services worldwide.
The FMC Group (including FMC SG, its wholly-owned subsidiaries and its affiliated entity ARC Kidney Dialysis Pte. Ltd.) provides haemodialysis (“HD”) services and peritoneal dialysis (“PD”) services in Singapore to End Stage Renal Disease (“ESRD”) patients through clinics operated by the FMC Group, and as a provider of HD services, on an outsourced basis, in clinics operated by third party service providers.
Asia Renal Care (SEA) Pte Ltd, which is part of the FMC Group, also offers management services to dialysis centres.
Additionally, FMC SG is involved in the sale of dialysis products and consumables in Singapore, which are used in the process of administering HD and/or PD treatments to ESRD patients.
The FMC Group uses the trading names, business names and brand names of “Fresenius Medical Care Singapore” and “Fresenius Kidney Care” in Singapore, and has the following direct and indirect subsidiaries and affiliated entities incorporated in Singapore: ARC Kidney Dialysis Pte Ltd; Asia Renal Care (Katong) Pte Ltd; Asia Renal Care Mt Elizabeth Pte Ltd; Asia Renal Care (SEA) Pte Ltd; and Kidney Therapy Centre Pte Ltd.
RT
RT is in the business of operating dialysis centres to provide HD services to ESRD patients in Singapore. RT provides its products and services in Singapore primarily under the trading name, business name and brand name of “RenalTeam”.
(iv) a description of the overlapping goods or services, including brand names;
FMC SG and RT primarily overlap in the provision of HD services to ESRD patients in Singapore.
(v) a description of substitute goods or services;
FMC SG submits that PD services are increasingly being seen as a substitute for HD services. The Ministry of Health and National Kidney Foundation have adopted measures to encourage the uptake of PD treatment among ESRD patients.
(vi) The applicant's views on:
a. definition of the relevant market(s);
FMC SG is of the view that the relevant market is the provision of outpatient HD services to ESRD patients in Singapore by private sector service providers, restructured hospitals (including joint ventures between restructured hospitals and private operator), and including Voluntary Welfare Organisations (“VWOs”) (the “Relevant Market”).
FMC SG is of the view that, in light of the increasing trend for PD services as an alternative to HD services, a broader market definition would include the provision of PD services in Singapore.
b. the way in which competition functions in this market;
It is submitted that HD service providers primarily compete on price and quality of HD services. HD patients are extremely price sensitive and are able to switch dialysis centres providers easily without significant switching costs.
c. barriers to entry and countervailing buyer power
FMC SG is of the view that barriers to entry and expansion in the Relevant Market are low for the following reasons:
- existing dialysis service providers can easily expand the capacity of existing dialysis centres;
- the cost to set up a new dialysis centre is not insurmountable;
- there are no significant operating economies of scale that could constitute barriers to entry;
- the time taken to open a new centre typically takes between two to six months;
- access to nephrologists and nurses is also not a significant barrier to entry; and
- there have been multiple instances of market entry in the past five years.
It is submitted that countervailing buyer power is substantial as there are virtually no switching costs for patients to switch from one dialysis provider to another to receive HD treatment. Additionally, alternative options such as PD services and new innovative treatments are increasingly becoming viable options for patients.
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
Non-coordinated effects
FMC SG submits that the Proposed Transaction will not give rise to any non-coordinated effects for the following reasons:
- presence of strong existing competition in the Relevant Market;
- the barriers to entry and expansion are low for new dialysis services providers looking to set up clinics in Singapore;
- patients are able to switch between dialysis centres without significant switching costs; and
- there are alternatives to HD services such as existing PD services.
Coordinated effects
FMC SG submits that the Proposed Transaction will not give rise to any coordinated effects for the following reasons:
- there are a multitude and range of existing competitors of varying scales of operations in the Relevant Market, which reduces the ability of the merged entity to arrive at an alignment or coordination of its behaviour with other competitors;
- the ease of switching by patients, which creates strong commercial incentives for incumbent players to continue pricing competitively;
- restructured hospitals are not profit-driven and thus unlikely to coordinate with private dialysis services providers; and
- the barriers to entry and expansion in the Relevant Market are low, and thus new entrants are able to destabilise any potential alignment of behaviour by the incumbent operators.
Vertical effects
FMC SG is a vertically integrated provider of both HD products and services. However, FMC SG submits that the Proposed Transaction will not give rise to any significant vertical effects for the following reasons:
- Customers for HD products comprise all categories of HD service providers (i.e., VWOs, private operators, and restructured hospitals), and RT would be considered a relatively small buyer of HD products in comparison to much larger HD service providers such as the National Kidney Foundation and the Kidney Dialysis Foundation Ltd.; and
- FMC SG submits that it would not have the ability nor incentive to foreclose competing HD service providers in Singapore post-Proposed Transaction, on the basis that there are multiple competing suppliers of HD products in Singapore that are alternatives to FMC SG.
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