Proposal to close Weddel plants concerns Commission
Published18 Nov 1994
The Commerce Commission today released a draft determination saying the proposal by a consortium of meat companies to buy and then close the Weddel meat processing plants would be likely to substantially lessen competition and that this anti-competitive effect would not be outweighed by public benefits.
The Consortium of 17 meat companies has applied for authorisation of restrictive trade practices in relation to its proposed arrangement to close the plants. The Commerce Act prohibits anti-competitive behaviour, called restrictive trade practices.
It also allows for authorisation of restrictive trade practices. For an authorisation to be granted, it must be shown that the public benefit is greater than the detriment to competition.
Commission Chairman, Alan Bollard, said the Commission's concern is that the information currently available does not clearly show that the benefits claimed by the consortium would result from the arrangement.
"The evidence now available suggests some of the claimed benefits might not occur at all, and others might occur even if the arrangement was not in place," Dr Bollard said.
"A stronger linking of the claimed public benefits to the proposal is required before the Commission could accept them as public benefits and before it could assess the weight, if any, to be given to them."
The benefits claimed by the consortium are: cost savings for the industry over eight years, better international marketing, positive effects on suppliers of livestock and developments in domestic processing.
The Commission's view is any cost savings would substantially diminish if other companies opened new plants in less than eight years time.
"It is highly doubtful that a period as long as eight years can be assumed," Dr Bollard said.
The Commission feels more evidence is needed to link the other claimed benefits to the arrangement and to quantify them.
"If this cannot be done the Commission is not able to give them any significant weight."
The Commission is seeking further comment and information from interested parties and will continue its own research. Interested parties have until December 2 to get their submissions on the draft determination to the Commission.
A conference of interested parties has been called by the Commission and has been scheduled for January 16-20.
The Commission expects to release its final determination by late January.
Media contact:Vince Cholewa, Communications Officer
