Primary Health Care has caved in to pressure from the competition watchdog and will sell recently acquired Queensland laboratories to rival Medlab Pathology.
The company has agreed to sell more than 70 Queensland labs that it bought from Healthscope in early 2015, to avoid court action from the Australian Competition and Consumer Commission over concerns it breached competition laws.
ACCC chairman Rod Sims said Primary went ahead with the acquisition without informing the watchdog, despite being aware the ACCC had serious concerns about the impact it would have on competition.
"The acquisition removed a significant third player in Queensland, leaving just two major full service pathology providers in that state," Mr Sims said on Thursday.
"We considered that this change in market structure would be likely to result in increased prices and reduced service levels for pathology services in Queensland."
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Primary said it still believes its purchase of Healthscope's labs does not substantially lessen competition, but it had agreed to address the ACCC's concerns by progressively selling the labs to Sydney-based Medlab over the next 12 months.
"The undertaking avoids further loss of management time and the incurring of further costs associated with an ongoing ACCC investigation," Primary said.
The assets to be sold account for about three per cent of Primary's pathology collection centres, and the divestment will have no material impact on profit, Primary said.
Healthscope said it fully cooperated with the ACCC's probe despite also holding the belief the transaction didn't threaten competition.
Primary shares were down one cent at $3.81 at 1200 AEST.
