The Commerce Commission today cleared BP Oil New Zealand Limited to acquire Burmah Castrol NZ Limited.
Commission Deputy Chairman Mark Berry said that the Commission was satisfied that, should the acquisition go ahead, no party would acquire or strengthen a dominant position in any New Zealand market.
The proposed acquisition is the New Zealand arm of the international acquisition by BP Amoco plc of Burmah Castrol plc. Both companies are British-based and operate throughout the world.
Mr Berry said that in New Zealand BP and Castrol compete in the nationwide market for the manufacture, importation and supply of lubricant oils.
The Commission concluded that a merged BP/Castrol would be within the Commission's "safe harbours" for market share and would face effective competition from existing competitors, and new competitors could also enter the market.
The safe harbours published by the Commission in its Business Acquisitions Guidelines are:
40 percent market share, or
60 percent if at least one other competitor has 15 percent or more of the market.
Effective competition would remain from the other multi-national oil companies, Mobil, Shell and Caltex, from multi-national lubricant producer and supplier Fuchs Petrolab AG, and from smaller suppliers of various brands, some of which are Valvoline, Glydol and Pennzoil.
Barriers to large new suppliers entering the market are not high, though new entry by small suppliers would be more difficult.
In addition, large purchasers also have a degree of buying power that could constrain a merged BP/Castrol. Large purchasers include retail chains such as K mart, Deka and The Warehouse, service stations and specialty automotive stores including Repco and Appco. If unhappy with price or quality, they can switch to different suppliers.
Background
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any market.
Parties can apply for a clearance, which the Commission will grant if it is satisfied that dominance is not acquired or strengthened. A clearance, if granted, protects an acquisition from court action under the Act.
