The UK’s Competition and Markets Authority (CMA) has taken action to prevent a portion of a merger between two prominent players in the hearing implant sector. The move aims to protect patients who rely on the life-changing hearing implants and ensure affordable prices for the National Health Service (NHS), which funds the cost of these products in the UK.
Cochlear Limited and Oticon Medical, the hearing implants division of Demant A/S, proposed the merger in December 2022. The CMA referred the merger for an in-depth Phase 2 investigation led by an independent inquiry group.
The investigation determined that the merger could result in a significant reduction of competition in bone conduction solution (BCS) products. BCS products are implants that bypass damaged parts of the ear by converting sounds into vibrations directly sent to the inner ear.
The CMA’s final report on the merger highlighted the following conclusions:
- The merger would eliminate a major competitor in BCS products, resulting in the merged businesses holding a market share exceeding 90%.
- Competition from the remaining BCS competitor and other hearing solutions would not be enough to offset the negative impact on competition.
- The potential for new players to enter the market or smaller competitors to expand is limited, insufficient to address competition concerns.
According to CMA, the loss of competition in BCS products due to the merger could lead to reduced choices, lower quality, and less innovation for patients in need of hearing implants. Additionally, the NHS, as the primary purchaser of BCS products in the UK, may face the possibility of higher prices.
CMA Restricts Sale of Bone Conduction Business to Cochlear
To address these concerns, the CMA’s independent inquiry group has prohibited the sale of Oticon Medical’s BCS business to Cochlear. Demant will retain its BCS business and continue competing with Cochlear. The CMA determined that the cochlear implant (CI) business, another type of hearing implant, would not be affected by competition concerns and allowed the sale of Oticon Medical’s CI business to Cochlear.
The CMA’s decision took into account various evidence, including concerns raised by clinics prescribing these products and other market participants.
Kip Meek, chair of the independent panel of experts leading the investigation, emphasized the well-being of patients as their primary concern:
“Our primary concern is the well-being of patients. We found that the full merger could reduce innovation and quality and potentially cost the NHS more through higher prices. We’re pleased to find a solution which not only addresses these competition concerns but is also less onerous than preventing the merger entirely.”
Over the next 12 weeks, the CMA will oversee the separation of the business and implement its remedy decision.
Source: CMA
