Commission clears Tip Top to acquire some New American assets
Published31 Oct 1996
The Commerce Commission today cleared Tip Top Ice Cream Company Ltd to acquire most of the assets of New American Ice Cream Ltd.
Commission Chairman Dr Alan Bollard said the Commission was satisfied that the proposed acquisition would not result in Tip Top acquiring or strengthening a dominant position in any market.
Tip Top is New Zealand's largest ice cream manufacturer and New American is ultimately a subsidiary of New Zealand's largest dairy company, New Zealand Co-operative Dairy Company Ltd (NZCDC).
On September 24 the Commission declined to clear Tip Top to acquire New American's assets because it was not satisfied that Tip Top would not acquire a dominant position in the take home ice cream market if the proposal went ahead as then described.
On October 16, Tip Top came back to the Commission with a revised proposal.
In this second proposal, Tip Top would acquire New American's manufacturing plant, frozen novelty, scoop ice cream and frozen dessert business, but New American would retain its take home ice cream business.
After investigating the second proposal, the Commission confirmed its previous view that there are three relevant markets, those for manufacture and wholesale supply of frozen novelties and scoop ice creams, manufacture and wholesale supply of frozen desserts and manufacture and wholesale supply of take home ice cream.
It concluded that should the acquisition go ahead, no competition issues would arise in the frozen novelties and scoop ice cream, and frozen desserts markets.
In relation to the take home ice cream market, the Commission needed to be satisfied that New American retaining its wholesale business would prevent Tip Top gaining a dominant position in the market for the wholesaling of take home ice cream.
Dr Bollard said the Commission has received confidential information from New American's owners explaining how they intend to continue with the New American business.
In terms of the manufacturing of take home ice cream, the Commission noted that Tip Top would increase its share of industry capacity but considered it would be constrained by over capacity in the industry. All existing take home ice cream manufacturers have considerable unused capacity and, overall, the industry could readily double its output.
In addition, supermarkets have considerable buying power in the take home ice cream market and if dissatisfied with the quality or price they were offered, could take advantage of the industry's excess capacity and transfer their contracts to other manufacturers.
Dr Bollard said the combination of these factors satisfied the Commission that Tip Top would not acquire or strengthen a dominant position in the market for manufacture and wholesale supply of take home ice cream if the proposal goes ahead.
Media contact: Chief Investigator Commerce Act Geoff Thorn
