The Commerce Commission has published its reasons for declining to grant clearance for Transpacific Industries to acquire the South Island assets and businesses of EnviroWaste Services and up to 50% of the shares in Manawatu Waste.

The reasons can be viewed on the Commission's website. The clearance application was declined on 30 May 2007.

Commission Chair, Paula Rebstock, said that the Commission was not satisfied that the proposed acquisition would not have, or would not be likely to have, the effect of substantially lessening competition in certain waste markets.

Ms Rebstock said that the Commission found the proposed acquisition would have resulted in a substantial lessening of competition in the following separate waste markets:

  • wheelie bin/refuse bag waste collection markets in Wanganui, Palmerston North and Dunedin;
  • front-end-load waste collection markets in Taupo, Palmerston North, Horowhenua/Kapiti Coast; Nelson, Christchurch, Timaru/Oamaru and Dunedin;
  • the refuse transfer station market in Wanganui; and
  • the national multi-regional customer waste management market.

Ms Rebstock said that the Commission found that, because of high barriers to entry and the high market shares of Transpacific after the acquisition, the Commission could not be satisfied that Transpacific would be constrained by existing or potential competitors in these markets.

Ms Rebstock said that the Commission also found that, as a result of vertical integration effects in New Plymouth and Wanganui, the acquisition would have the effect of substantially lessening competition in wheelie bin and front-end-load markets in those two regions.

Vertical acquisitions are those that involve the combining of businesses operating at different functional market levels in the production of a particular good or service. Here, after the acquisition, Transpacific would have operated in the:

  • waste collection and refuse transfer station functional levels in the New Plymouth region; and
  • waste collection, refuse transfer station and landfill functional levels in the Wanganui region.

The vertical aspects of acquisitions may result in a substantial lessening of competition in a market when market power exists at one of the affected functional levels. Where such a situation is found to exist, the Commission considers whether the acquisition would provide the merged entity with increased incentives and ability to leverage its market power in one functional level (in this case refuse transfer stations and/or landfills) to another functional level (in this case waste collection).

Background

The reasons for the decision can be viewed on the Commission's website under Public Registers / Mergers and Acquisitions - clearances. Click on the decision number in the right hand column of the table.

Transpacific Industries (NZ) Limited, is wholly owned by Transpacific Industries Group Limited, an Australian company listed on the Australian Stock Exchange. EnviroWaste Services is ultimately wholly owned by Ironbridge Capital Pty Limited, an Australian private equity firm.