Commission declines to clear Southern Cross to acquire Aetna Health
Published25 Aug 2000
The Commerce Commission has today declined to give a clearance to The Southern Cross Medical Care Society to acquire all the issued share capital in 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.
Chair of the Commission John Belgrave said that the Commission had concluded that it is not satisfied that the proposal would not result in Southern Cross acquiring or strengthening a dominant position in the medical insurance market.
If the proposed acquisition were allowed to proceed, Southern Cross and Aetna would have a very high combined market share. Mr Belgrave said that in the Commission's view there were 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 services or benefits. Moreover the proposed acquisition would have the effect of removing Southern Cross' principal competitor.
Background
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any markets.
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.
