Commerce Commission issues draft determination on wool scouring assets application
Published13 Apr 2011
The Commerce Commission has reached a preliminary view that it should allow Cavalier Wool Holdings to acquire up to 100 per cent of New Zealand Wool Services International's wool scouring assets and stock (and/or the shares in New Zealand Wool Services International).
The Commerce Commission has reached a preliminary view that it should allow Cavalier Wool Holdings to acquire up to 100 per cent of New Zealand Wool Services International's wool scouring assets and stock (and/or the shares in New Zealand Wool Services International).
The Commission has today published its draft determination on Cavalier Wool Holding's application under the Commerce Act for authorisation of the proposed acquisition.
"Our preliminary view is that the proposed acquisition would substantially lessen competition in the North and South Island wool scouring markets. Cavalier Wool Holdings would essentially have a monopoly on the supply of wool scouring services post acquisition. However, at this preliminary stage, the Commission expects that there would be benefits to the public that would outweigh the loss of competition," said Commerce Commission Chair Dr Mark Berry.
"The Commission considers there is the potential for Cavalier Wool Holdings to raise prices after the acquisition because of the loss of the constraining influence of NZ Wool Services International. However, we expect that the level of the detriment resulting from the acquisition is likely to be limited by the ongoing, long-term competitive threat of the Chinese wool scouring industry and the potential for new entry into the New Zealand wool scouring industry," said Dr Berry.
"On the other hand, the Commission considers that there would be considerable benefits to the public arising from the rationalisation of the wool scouring industry that Cavalier Wool proposes to carry out. The rationalisation is likely to lead to lower production and administration costs, the freeing up of industrial sites, and lower ongoing capital expenditure requirements in the future."
The Commission is seeking submissions on its Draft Determination by 27 April 2011. Submissions will be posted on the Commission's website. The Commission will hold a conference with interested parties on 4 and 5 May, and the final determination will be issued by 31 May 2011. You can find details of the conference on the Commission's web site at:
Any person who proposes to acquire assets of a business or shares and considers that the acquisition may breach s47, can make an application for an authorisation under s67 of the Commerce Act.
Section 67(3)(a) of the Act requires the Commission to give clearance for a proposed acquisition if it is satisfied that the proposed acquisition will not have, and would not be likely to have, the effect of substantially lessening competition in a market. If the Commission is not so satisfied, clearance must be declined, although it may still grant an authorisation under s 67(3)(b) of the Act if the Commission is satisfied that the acquisition will result, or will be likely to result, in such a benefit to the public that it should be permitted.
If the Commission is not satisfied that the acquisition will result, or will be likely to result, in such a benefit to the public that it should be permitted, it must decline an authorisation under section 67(3)(c).
