ACCC v Medibank Private Limited [2017] FCA 1006: ACCC loses Federal Court bid over Alleged Misleading Conduct Claim

Friday 1 September 2017 @ 8.57 a.m. | Legal Research | Trade & Commerce

In the recent case of ACCC v Medibank Private Limited [2017] FCA 1006 (30 August 2017), the Federal Court has dismissed proceedings brought by the Australian Competition and Consumer Commission (the ACCC) against Medibank Private Limited (Medibank).

Background to the Judgment

From at least 1 January 2012, Medibank had agreements with many pathology and radiology providers who supplied services to hospital patients (such as blood tests, x-rays, CT scans and MRI scans). Under these agreements, in situations where these providers charged above the Medicare Benefit Schedule (MBS) fee (the gap), Medibank and ahm members were covered and so Medibank paid the gap on their behalf.

From 1 September 2014, Medibank terminated or phased out these agreements. As a result of the agreements no longer being in force, from that date Medibank and ahm members have no longer been completely covered for in-hospital pathology or radiology services, and have had to pay the gap as an out-of-pocket expense.

The ACCC Allegations

The ACCC had alleged that Medibank made false, misleading or deceptive representations and engaged in unconscionable conduct in relation to its failure to notify Medibank members and members of its subsidiary brand, ahm, of its decision to limit benefits for in-hospital pathology and radiology services, despite representing across a number of its communication and marketing materials that it would.

The ACCC had argued Medibank calculated that if the change was disclosed, there was a risk members would leave the insurer, damaging its brand and reputation. But Medibank said it clearly stated in its public documentation that it paid benefits "towards" the cost of medical services and hospital charges and said it had never told members that it would cover all costs associated with in-hospital diagnostic services.

The Judgment

Medibank said it said it had never told members that it would cover all costs associated with in-hospital diagnostic services, with Justice O’Callaghan dismissing the allegations. His Honour said at [para 177]:

“In my view, and in any event, none of the documents in evidence upon which the applicant relies, whether they are what it seeks (wrongly) to characterise as 'pre' or 'post' sale documents, could be read or construed by a reasonable or ordinary consumer as a representation that Medibank would indemnify members for all costs associated with in-hospital diagnostic services.”

And further at [paras 302-303]:

“Ultimately, that evidence, which I unhesitatingly accept, demonstrates that the decision not to communicate with members (about which the applicant complains) was a decision made in the context of the exercise by the relevant committee of its business judgment. Some may agree with it, some may disagree with it, but, in my view, there was nothing remotely unconscionable about it … The applicant’s case will accordingly be dismissed, with costs.”

Statement from Medibank

The health insurer's Chief Executive Craig Drummond welcomed the court's decision and in a statement said:

"Medibank defended the case because it firmly believed it had not acted unlawfully or unconscionably nor had it misled or deceived its customers."

The ACCC Chairman Rod Sims said:

“The ACCC believes that consumers have a right to be informed in advance of important changes to their private health insurance cover. We took this case because we believed that Medibank’s failure to advise customers of the changes to their cover for in-hospital pathology and radiology services affected vulnerable consumers. In particular, we believed that Medibank’s changes affected those with chronic medical conditions who required these services regularly. The ACCC is carefully considering the judgment.”

Mr Sims said the ACCC would consider an appeal.

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Court dismisses ACCC action against Medibank – ACCC Release MR 146/17

Medibank case: ACCC loses Federal Court bid against insurer over alleged misleading conduct –

ACCC v Medibank Private Limited [2017] FCA 1006 (30 August 2017)

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