Commission clears Goodman Fielder acquisition of Defiance, subject to divestment
Published17 Jun 1997
The Commerce Commission today cleared Goodman Fielder Ltd to acquire the New Zealand assets of the baking and milling operations of Defiance Mills Ltd, subject to Goodman Fielder divesting certain milling assets.
Both companies are based in Australia and have extensive interests in New Zealand.
Goodman Fielder's New Zealand interests include Quality Bakers New Zealand Ltd, Goodman Fielder Mills (NZ) Ltd and Bluebird Foods Ltd. It produces the Nature's Fresh, Molenberg, Country Split, Vogel's, Reizensteins and McGregors brands of bread and the Champion and Hymarket brands of flour.
Defiance owns and operates in New Zealand a range of milling, baking, crumbing and sandwich making businesses. It bakes bread under the brand name Countryfare and produces flour under the Elfin and Homelife brands.
Commission Chairman Dr Alan Bollard said that the Commission was satisfied that, should the acquisition go ahead with the divestments, Goodman Fielder would not acquire or strengthen a dominant position in any market.
The Commission considered that 15 flour and bread markets were relevant to Goodman Fielder's application for clearance. Those markets are identified below.
On April 14, the Commission declined a previous application by Goodman Fielder seeking clearance for the proposed acquisition. The Commission had not been satisfied that Goodman Fielder would not acquire or strengthen a dominant position in seven of the defined markets.
Those dominance concerns were largely removed by Goodman Fielder's current proposal which includes the divestment of its Christchurch mill, including its retail packing plant, to its competitor Allied Foods Company Ltd, within a limited time period.
The effect of the divestment on Allied Foods' ability to compete was an important factor in the Commission's decision.
Four of the seven markets about which the Commission had been concerned were South Island flour markets. Two additional markets were North Island flour markets. The seventh was a South Island packaged bread market.
Other changes which have occurred in the bread and flour industries since the last application, including increased supply of flour to supermarkets by independent mills, further alleviated dominance concerns. Supermarkets impose significant constraints on Goodman Fielder, because they are the largest acquirers of bread and flour.
Even though the acquisition would initially result in high market shares being held by Goodman Fielder in several of the relevant markets, the Commission was satisfied that existing competitors could expand, and new ones could enter the markets, if Goodman Fielder increased its prices or reduced its services.
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any market. Parties can apply to the Commission for a clearance which will be granted if the Commission is satisfied that dominance will not be acquired or strengthened.
The 15 markets identified and investigated by the Commission in making this clearance decision were those for:
· the production and acquisition of milling wheat in the North Island;
· the production and acquisition of milling wheat in the South Island;
· the production and acquisition of industrial bulk flour in the North Island;
· the production and acquisition of industrial bulk flour in the South Island; *
· the production and acquisition of industrial bagged flour in the North Island;
· the production and acquisition of industrial bagged flour in the South Island; *
· the production and sale of retail bagged flour in the North Island; *
· the production and sale of retail bagged flour in the South Island; *
· the production and acquisition of premium pastry flour in the North Island; *
· the production and acquisition of premium pastry flour in the South Island. *
· the production and acquisition of bran and pollard in the North Island;
· the production and acquisition of bran and pollard in the South Island;
· the production and sale of packaged bread in the upper North Island;
· the production and sale of packaged bread in the lower North Island; and
· the production and sale of packaged bread in the South Island. *
* Indicates markets where the Commission was, in its April 14 decision, not satisfied that Goodman Fielder would not acquire or strengthen a dominant position. The Commission was satisfied under both the initial and current proposals that dominance would not be acquired or strengthened in the remaining eight markets.
