Health insurer Discovery’s Vitality scheme and gym chains Virgin Active and Planet Fitness are in an exclusive club which is stifling the profits of smaller gyms‚ leaving some with no choice but to shut their doors.
This is the allegation independent gym group Fit SA made before the Competition Tribunal on Wednesday‚ in a David-and-Goliath showdown with the three companies.
Fit SA wants to make amendments in its case against Discovery and the big gym chains‚ which Planet Fitness and Virgin Active oppose.
Discovery’s Vitality scheme subsidises the gym contracts of its members‚ but only if they join with Virgin Active or Planet Fitness.
Fit SA says that the large subsidies‚ of up to 60%‚ are hurting the businesses of smaller gyms and believes that uncompetitive practices underpin the deals Discovery has with the two gyms.
According to Fit SA‚ the operating costs of its member gyms alone cannot compete with the heavily subsidised Virgin Active and Planet Fitness premiums.
For the independent gym group‚ advocate Quentin Donaldson argued that Virgin Active and Planet Fitness had abused their dominance in the gym market to offer consumers cheap deals‚ while making profits.
“There are gyms charging R50 a month for a membership with the rest being paid by Discovery‚” he said.
Fit SA wants the subsidy scheme extended to its member gyms.
“It is our belief that Virgin Active and Planet Fitness have entered into contractual agreements that prevent Discovery from extending the subsidy scheme.
“They have abused their dominance [in the market] to the extent that they’ve acquired exclusivity.
“The [exclusive] subsidy will eventually close down all the independent gyms if it’s not prevented.
“There is no basis for this to be allowed. It is certainly not in the public’s interest. It is not in the interests of competition‚” Donaldson said.
Fit SA also says that Discovery restricts its gym members from entering into incentive point-based system agreements with competing insurers‚ which it believes is unfair.
Competition Tribunal commissioner Norman Manoim said‚ however‚ that Fit SA’s case and the relief it was seeking was not clearly defined.
“Who is the bad guy out there in terms of these respondents?
“You’re saying‚ ‘I want to join the club as well‚’ and if you join you want to change the rules.”
Fit SA‚ with members the Gym Company and Zone Fitness‚ has approached the Tribunal directly after the Competition Commission last year found that the conduct it complained of was not in contravention of the Competition Act.
Planet Fitness and Virgin Active are now expected to make submissions.
The hearing continues.