Commission declines Southern Cross' second application for clearance to acquire Aetna Health
Published13 Sep 2000
The Commerce Commission today declined The Southern Cross Medical Care Society's second application for clearance to acquire Aetna Health (NZ) Limited.
Both Southern Cross and Aetna are involved in providing medical health insurance, and are currently by far the two largest providers of this insurance in New Zealand.
Commission Chair John Belgrave said that the Commission had declined Southern Cross' first application last month because the Commission was not satisfied that the proposal would not result in Southern Cross acquiring or strengthening a dominant position in the medical insurance market.
Southern Cross then made a second application including an undertaking that, if the proposal went ahead, it would divest a number of medical insurance policies of insured members of Aetna.
In its first decision the Commission had stated that a merged Southern Cross and Aetna would have a very high combined market share. The Commission had doubts that the merged entity would face effective constraint from existing or potential competitors in the event that it attempted to significantly raise prices, or reduce benefits or services. Moreover, the proposed acquisition would have the effect of removing Southern Cross' principal competitor.
The Commission concluded today that it is not satisfied that a divestment undertaking of the kind offered would answer the Commission's concerns about dominance.
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 legal action under the Act.
