Commission's preliminary view: on current information, it would not authorise RAL to acquire Turoa
Published28 Aug 2000
The Commerce Commission today gave its preliminary view that, based on information currently available, it would not authorise Ruapheu Alpine Lifts Limited (RAL) to acquire Turoa Ski Resort Limited (in receivership).
RAL and Turoa own the only two major ski resorts in the North Island, Whakapapa and Turoa.
Commission Chair John Belgrave said that the Commission's preliminary view is that if RAL owned both fields, then the detriments to competition in the North Island skiing market would outweigh the benefits from the proposed acquisition.
Mr Belgrave said that the Commission's preliminary estimates show economic detriments of between $764,000 to $3,380,000 a year, compared to estimated benefits of between $401,000 to $1,743,434 a year.
In assessing economic detriments and benefits the Commission must compare what would happen in the future if it declined the authorisation with what would happen if it granted the authorisation.
"In this case, our preliminary view is that if we declined the authorisation, then a third party would acquire Turoa and continue to run it independently of RAL," Mr Belgrave said. "The Receiver has confirmed that other final bids have been made for Turoa."
In assessing the benefits of a proposed acquisition, the Commission can only consider those benefits that would arise directly from the proposed acquisition. That is, it cannot consider benefits that would also arise if the acquisition did not go ahead.
Mr Belgrave said that the Commission believes that some of the benefits claimed by RAL in its application do not depend on the proposal and could occur if some other party were to acquire Turoa. Therefore, the Commission's preliminary estimate of the benefits is lower than RAL's.
The detriments identified by the Commission would all arise from a combined RAL/Turoa being dominant in the North Island skiing market. The detriments would include:
the ability of RAL/Turoa to increase prices (allocative inefficiency)
inefficiency in providing services (productive inefficiency)
slower responses to new technology and ideas, and to changes in the industry (dynamic inefficiency), and
the ability of RAL/Turoa to reduce the quality of services (product quality).
Mr Belgrave said that on balance, the Commission considers that, on a conservative approach, the detriments outweigh the benefits.
The draft determination includes 18 questions, which identify areas where the Commission wants further information.
Interested parties now have until September 11 to make submissions on the Commission's draft determination, and experts employed by the interested parties have until September 18 to make their submissions.
It is likely that a conference, where interested parties will be able to provide further information and to answer questions from the Commission, will be held in Wellington during the first week of October.
The Commission will release its final decision on October 24. That decision will draw together the information from RAL's application, the Commission's draft determination, interested parties' submissions and the conference.
Background
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any market.
Parties can apply for authorisation in effect an exemption from the Act of a business acquisition. The Commission will grant an authorisation if it is satisfied that public benefits from a proposed acquisition would outweigh its detriments to competition.
Copies of the Commission's draft determination will soon be available from its website, www.comcom.govt.nz, and are available from reception at its Wellington office, level 7 Landcorp House, 101 Lambton Quay.
