Commerce Commission: all dairy company mergers must comply with Commerce Act
Published16 Apr 1999
The Commerce Commission today advised dairy companies that any mergers in that industry must comply with the Commerce Act.
Commission Acting Chairman Mark Berry said that the Commission is closely monitoring suggestions to merge five dairy companies into one co-operative that would control almost all the country's milk production.
The companies are Kiwi Co-operative Dairies Limited, New Zealand Co-operative Dairy Company Limited (NZCDC), Northland Co-operative Dairy Company Limited, South Island Dairy Co-operative Limited (SIDCO) and Westland Co-operative Dairy Company.
Mr Berry strongly advised that before any merger goes ahead the companies must fully consider their responsibilities under the Act. The Act prohibits business acquisitions that result in dominance being acquired or strengthened in any market. However, the Act also allows for authorisation of an acquisition that would otherwise be prohibited because of dominance concerns.
"The Commission earlier this year declined to clear Kiwi to acquire SIDCO because of dominance concerns. A mega-merger would probably raise similar concerns," Mr Berry said. "If the proposal continues the Commission would expect that an authorisation would be sought."
The authorisation process would take a minimum of 60 working days. It involves the Commission preparing a draft determination, receiving submissions and holding a public conference so that it can measure public benefits against detriments from loss of competition.
"This is not a process that can be done over night," Mr Berry said.
"This proposal involves huge change in one of New Zealand's biggest industries. If the proposal continues the Commission will investigate it thoroughly and will make a carefully thought out decision."
Background
In February this year the Commission declined to clear Kiwi to acquire SIDCO because of dominance concerns in the South Island market for the supply/acquisition of raw milk (this is a market between farmers and dairy companies).
Kiwi then applied for an authorisation, and on March 30 the Commission published a draft determination stating that its preliminary view is that it would authorise the proposal.
However, the draft determination also stated that a merger between NZCDC and SIDCO could result in dominance in the national market for the supply/acquisition of dairy products for export (this is the market between dairy companies and the Dairy Board).
A conference to consider the Kiwi/SIDCO authorisation will be held on May 5-6.
Relevant documents available from the Commission's Wellington office:
? the Commission's decision to decline Kiwi clearance to acquire SIDCO (also on website);
? Kiwi's application for authorisation;
? The Commission's draft determination (also on website);
? Business Acquisitions Guidelines (also on website);
? Guidelines to the Analysis of Public Benefits and Detriments; and
