Commission clears EFG Services Limited to acquire cork supplier
Published04 Apr 2000
The Commerce Commission has cleared EFG Services Limited, to acquire brewing and winemaking supplies distributor, Carter & Associates (1995) Limited.
Commissioner Paula Rebstock said that the Commission was satisfied that, should the proposal go ahead, no parties would acquire or strengthen a dominant position in the nationwide market for the supply of stoppers for wine bottles.
While Carter supplies a range of products, there would be aggregation in the market for wine stoppers only.
Carter is the major supplier of corks to winemakers in New Zealand. EFG is not currently trading but an interconnected company, Vinpac International Pty Limited, supplies a small part of the New Zealand market.
The combined market share of Carter and Vinpac would be outside the "safe harbours" published in the Commission's Business Acquisitions Guidelines. The safe harbours are:
40 percent market share, and
60 percent market share if at least one competitor has 15 percent or more of the market.
The Commission was satisfied that should a combined Carter/EFG try to increase prices or reduce quality, then barriers to a new competitor entering the market are low. In addition large and medium-sized wine producers could readily bypass the combined entity and buy corks directly from the manufacturers.
Most wine corks used in New Zealand are made by the more than 150 manufacturers in Portugal, and are made from the bark of cork oaks.
Distributors import the corks, grade them, treat them and, if required, brand or print them with the winemaker's name or logo. Some New Zealand winemakers already import their own corks.
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.
