News: UPDATE 1-Australian court dismisses allegations against health insurer Medibank

• Federal Court dismisses all allegations against Medibank -ACCC
• Medibank says it firmly believed its actions were not unlawful

(Updates with Medibank response)

SYDNEY, Aug 30 (Reuters) - Australia's competition watchdog on Wednesday said it had lost its Federal Court case against the country's biggest private health insurer Medibank Private Ltd (MPL).

The Australian Competition and Consumer Commission (ACCC) had alleged that Medibank had failed to notify customers in advance about a move to limit benefits for pathology and radiology services while in hospital.

The ACCC had said Medibank did not give advance notice about the policy change in 2014 because its members might have opted to switch to other providers and that might have hurt its initial public offering.

The conduct affected most Medibank policies in place since January 2012, the watchdog said.

But Justice O'Callaghan dismissed all allegations, it added, without providing more details on the decision.

"The ACCC is carefully considering the judgment," ACCC Chairman Rod Sims said. "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."

Medibank shares ended 1 percent higher on Wednesday in a flat broader market (xjo).

"We are pleased that the court has dismissed the ACCC's case, as we firmly believe that our actions were not unlawful," said Medibank Chief Executive Officer Craig Drummond.