The Commerce Commission has today released a draft determination saying that, on the information currently available to it, it would not authorise a proposal for Ravensdown Corporation Limited to buy up to 100 percent of SouthFert Co-operative Limited.
"Our preliminary view is that in this case, the proposal would give rise to a dominant position in the market for importation, manufacture and wholesale supply of fertiliser in the South Island," Commission Member, Terry Stapleton said. "The overall result is likely to be a less competitive fertiliser industry in the South Island which is less responsive to customer needs."
Ravensdown has applied for authorisation to buy up to 100 percent of SouthFert. SouthFert is the only other major importer, manufacturer and wholesale supplier of fertiliser in the South Island.
The draft determination is not the Commission's final decision. Ravensdown and interested parties now have a clear indication of how the Commission views the proposal, have time to make written submissions and provide further information at a conference. A final decision should be made by June 20.
The Commerce Act prohibits business acquisitions that lead to a dominant position being acquired or strengthened in any market. However, it also allows them to be authorised if the Commission is satisfied that the public benefits arising from the acquisition outweigh the detriments to competition. To be considered, the claimed benefits must arise directly from the acquisition and not arise if the acquisition does not go ahead.
The Commission has identified several detriments resulting from reduced competition in the market for importation, manufacture and wholesale supply of fertiliser in the South Island. It has assessed them under the following headings:
· price and output and loss of allocative efficiency
· loss of productive efficiency
· loss of product and service quality
· loss of innovation efficiency
In its application for authorisation, Ravensdown claimed the following public benefits for the proposal, these were also examined by the Commission in reaching its draft determination, under the following headings:
· benefits of rationalisation;
· other savings to Ravensdown;
· consequential benefits;
· more efficient pricing;
· creation of competition in the North Island; and
· reduction in environmental degradation.
"The Commission has assessed and compared the detriments and benefits and, on balance, it believes the detriments outweigh the benefits," Mr Stapleton said. "If this conclusion is confirmed by submissions made on the draft determination and by information given to the Commission at the conference, the Commission will not authorise the proposed acquisition."
Timetable of Commission process:
by 24 May applicant and interested parties to make submissions on draft determination
June 5-6 conference of applicant and interested parties in Wellington - the conference is an opportunity for further information to be presented and for the Commission to ask questions, it is not adversarial
by June 20 final determination
Media contact: Communications Officer Vincent Cholewa
