Commission authorises Tennex’s acquisition of San-i-pak
Published20 Dec 2018
The Commerce Commission has today granted authorisation to Tennex to acquire the assets of competing Canterbury-based waste firm San-i-Pak.
Tennex, through its subsidiary International Waste Limited (IWL), and San-i-pak are the sole providers of medical and quarantine waste treatment and disposal services in the South Island. The acquisition would result in IWL being the only provider of these services subject to another waste management firm entering the market in the future.
The Commission’s preliminary view, published last month in a Draft Determination, was that it should grant authorisation. After taking into account submissions received on the Draft Determination, its view remains unchanged.
Chairman Dr Mark Berry said that while the acquisition would likely result in IWL raising its prices for its quarantine and medical waste disposal services in Canterbury, the Commission’s view was that it was likely to produce such a benefit to the New Zealand public that it should be authorised.
“We estimate the consolidation of the two firms could produce a net benefit of up to $1.3 million in net present value terms over 10 years, which in our view would outweigh the likely negative consequences of this acquisition. Tennex will also face some constraints when it negotiates national contracts and other firms are likely to submit bids when large customer contracts are up for tender in Christchurch,” Dr Berry said.
The Commission’s final determination will be available in the new year on the Commission’s case register.
The Commission has previously considered this acquisition in a clearance context. On 29 February 2016, we declined to give clearance to Tennex to acquire the medical and quarantine waste collection and treatment assets of San-i-pak as we considered the acquisition would likely result in a substantial lessening of competition.
Tennex subsequently applied for authorisation for this acquisition on 17 September 2018. Authorisation applications follow a two-step process under the Commerce Act. We must first assess whether the merger would be likely to substantially lessen competition in a market. If we are satisfied that the merger is not likely to substantially lessen competition, then we would clear the merger at the first step.
If we cannot give clearance due to competition concerns, the second step is to determine whether the merger should be authorised applying the public benefit test. The public benefit test involves a balancing of the public benefits and detriments that would, or would be likely to, result from the merger. We must authorise a merger if we are satisfied that the merger will result in such a benefit to the public that it should be permitted.
The Commission’s view on the clearance step in the Tennex acquisition has not changed since the first application in 2016. It has now been asked to undertake the public benefit assessment under the authorisation process and on this test its decision is to grant approval for the merger.