The Commerce Commission has today released guidelines on how it will consider divestment undertakings as part of an application for clearance for a business merger or acquisition.
"The divestment guidelines will assist businesses and their legal advisers in understanding the Commission's approach when assessing divestment undertakings in relation to a clearance application," said Commerce Commission General Manager, Enforcement, Kate Morrison. "The guidelines also outline the information applicants need to provide when offering divestment undertakings."
"The Commission considers that businesses making an application for clearance are in the best position to decide whether to offer divestment undertakings and the scope of any offer. However, if applicants consider that divestment undertakings may remedy any potential substantial lessening of competition that would be created as a result of the proposed merger or acquisition, the Commission encourages them to offer their undertakings as early as possible in the clearance process," said Ms Morrison.
In developing the final guidelines, the Commission undertook a consultation process. The final guidelines reflect feedback received during that process as well as international best practice.
The divestment guidelines should be read alongside the Commission's mergers and acquisitions guidelines and the merger and acquisition clearance process guidelines. These guidelines can be accessed from the Commission's website at www.comcom.govt.nz/competition-resources
Background
Section 47 of the Commerce Act 1986 prohibits acquisitions of the assets or shares of a business that would have, or would be likely to have, the effect of substantially lessening competition in a market.
Under section 66(3)(a) of the Commerce Act, the Commission may give clearance for a merger if it is satisfied that the acquisition will not have, or would not be likely to have, the effect of substantially lessening competition in a market.
Under section 69A of the Commerce Act, the Commission may accept undertakings in giving a clearance. Undertakings must be provided in written form by the applicant or on behalf of the applicant.
The Commission can only accept undertakings to divest of assets or shares. Under the Commerce Act the Commission is only able to consider structural undertakings. The Commission is unable to accept behavioural undertakings.
