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Medibank Private Ltd and Primary Health Care Limited hammered on regulatory threats

What: By the close of Thursday’s trading session on the ASX the share prices of Medibank Private Ltd (ASX: MPL) and Primary Health Care Limited (ASX: PRY) had plunged 5.5% and 3.1% respectively.

So What: The catalysts for the falls – which compare to a flat day for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) – were two separate announcements by the Australian Competition and Consumer Commission (ACCC).

The first, stated that the ACCC had taken action against Medibank for alleged misleading and unconscionable conduct.

The second announcement stated that the ACCC had acted to restore competition for pathology services in Queensland.

What now: According to the release in relation to Medibank, the ACCC has alleged that Medibank contravened the Australian Consumer Law in its alleged failure to notify Medibank members regarding its decision to limit benefits paid to members for in-hospital pathology and radiology services.

The ACCC is seeking declarations, injunctions, compensation orders, pecuniary penalties, findings of fact, implementation of a trade practices compliance program, corrective notices and costs.

Meanwhile, the release regarding pathology services in Queensland has ramifications for Primary Health Care with the medical centre operator accepting a court enforceable divesture undertaking relating to the acquisition of Healthscope Ltd (ASX: HSO) pathology assets in Queensland in 2015.

For investors and shareholders alike, the actions by the ACCC regarding Primary appear unlikely to have a dramatic effect on the valuation of the company.

In contrast, the ACCC’s actions against Medibank could be significant, developments here should be watched closely.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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