The General Practice Owners Association of New Zealand Incorporated (GenPro) has lodged a formal complaint with the Commerce Commission, alleging that Te Whatu Ora and the Primary Health Organisations (PHOs) are in breach of the Fair Trading Act 1986 (Fair Trading Act).

GenPro says that general practice owners (GPs) are compelled to sign unfair standard form contracts with PHOs, who are intermediaries to channel funding to primary healthcare. The Contracted Provider Agreement between GPs and PHOs incorporates the terms of a separate agreement between Te Whatu Ora and PHOs, which GPs are not a party to and which they cannot practically or materially influence. This creates a clear power imbalance, and means that GPs are effectively excluded from decisions crucial to achieving the best health outcomes for New Zealanders.

Arguments presented by GenPro

GenPro represents the interests of member GPs across New Zealand. It advocates for fair and sustainable healthcare policies, ensuring that GPs can continue to provide essential services to their communities.

Dr. Angus Chambers, Chair of GenPro, has been a vocal advocate for addressing the systemic issues within the general practice contracting system.

GenPro argues that the contracting system, as it currently stands, allows Te Whatu Ora and PHOs to impose terms on GPs with little input from the latter. The contracting framework:

• creates a significant power imbalance,
• is detrimental to the sustainability of general practices; and
• undermines the ability of GPs to provide high-quality care to their communities.

GenPro's complaint highlights four clauses that are "unfair" to GPs:

1. The Contracted Provider Agreement incorporates the terms of a separate contract between Te Whatu Ora and the PHO (the PHO Services Agreement). This binds GPs to contract terms that they cannot practically or materially influence.
2. The Contracted Provider Agreement binds GPs to a fees framework (through the Annual Statement of Reasonable Fee Increases), that effectively caps the fees that they can charge patients for services. This means that GPs are unable to set fees that reflect actual costs, and force some practices to operate at a loss or at an unsustainable margin. Ultimately, this impacts on the quality of services provided and the ability to compete effectively.
3. The Contracted Provider Agreement provides that the Ministry of Health can prescribe the amount payable for services provided by general practices. There is no ability of GPs to negotiate or dispute the Ministry's funding decision, or to escalate their concerns.
4. The Contracted Provider Agreement can be varied pursuant to a compulsory variation to the PHO Services Agreement (indeed, funding changes have been made by way of compulsory variation for the past 5 years or more). As the name suggests, there is no requirement for Te Whatu Ora (or the PHO) to negotiate and agree the compulsory variations with GPs. The compulsory variations affect the funding received by GPs, and restrict the prices that GPs can charge for their services.

GenPro's request for the Commerce Commission to intervene

GenPro is asking the Commerce Commission to intervene and address the unfair terms imposed by the current contracting system. GenPro views the unfair contracting and funding model for primary healthcare as a real threat to the viability of GPs and the accessibility of primary healthcare in New Zealand.

The standard form contract is presented to GPs on a "take it or leave it" basis. GPs cannot feasibly operate without agreeing to the contract, due to the monopoly funding model for primary healthcare in New Zealand. The unfair terms affect existing and prospective GPs alike.

GenPro's overall objective is to seek changes that would create a more equitable and sustainable contracting system. This includes fairer terms for GPs and a more balanced power dynamic between Te Whatu Ora, PHOs, and GPs.

About the Fair Trading Act ban on unfair contract terms

The Fair Trading Act aims to facilitate a trading environment in which the interests of consumers are protected, businesses compete effectively, and consumers and businesses participate confidently. To achieve this goal, the Fair Trading Act prohibits certain unfair conduct and practices in relation to trade.

The unfair contract terms regime was extended to business-to-business contracts in August 2022. A court may declare a contract term to be unfair (on the application of the Commerce Commission) if it meets all three of the following requirements (Commerce Commission Unfair contract terms Guidelines August 2022):

• the term would cause a significant imbalance in the parties' rights and obligations arising under the contract;
• the term is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by it; and
• the term would cause detriment (whether financial or otherwise) to a party if it were applied, enforced or relied on.

The Commerce Commission is currently reviewing contract terms across a number of industries to ensure compliance with the unfair contract terms regime. It's worth noting that only the Commerce Commission can apply to the Court for a declaration that a contract term is unfair.

Reflecting the recent extension of the unfair contract terms regime to business-to-business contracts, there is very little case law in New Zealand on its application (with the exception of the Commerce Commission's proceedings against Viagogo). The Commerce Commission has produced helpful Guidelines to assist businesses to comply with their obligations, and businesses can also look to cases under the equivalent regime in Australia for guidance on how the prohibition is likely to be interpreted here.

We are here to help

Anthony Harper has extensive experience in advising clients in this space. If you require guidance to make a complaint about unfair terms, or respond to a Commerce Commission investigation, our Dispute and Litigation experts are here to help. Our Corporate and Commercial specialists work with businesses to draft compliant standard form contracts.

*Anthony Harper acts for GenPro.

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