Commission says get advice about business acquisitions
22 November 1995
The Commerce Commission expects companies to exercise their judgement and to contact it if they are unsure about business acquisitions they may become involved in.
Commission Chairman Dr Alan Bollard said under the Commerce Act the Commission monitors all business acquisitions and it will investigate potentially anti-competitive acquisitions.
Dr Bollard gave the warning as the Commission is considering legal action to strike-down a merger it was not notified of. He would not name the parties to the merger unless court action begins.
He was speaking in Wellington today at a conference on mergers and acquisitions.
He said New Zealand's current law covering business acquisitions has been in force since January 1990 and companies should now understand how the Commission enforces it. Furthermore the law does not put onerous restrictions on businesses, with the large majority of acquisitions posing no concerns.
What the law does prohibit is the acquiring or strengthening of a dominant position in any market. This is a high threshold compared to other OECD countries, and the Commission will respond vigorously if there is a concern that an acquisition may cross it.
If businesses are concerned that an acquisition they are considering is near or over the threshold, they have the choice as to whether or not they apply to the Commission for clearance or authorisation.
Almost all companies involved in major acquisitions do apply. If a significant merger proceeds without an application, the Commission will investigate it.
It runs an ongoing surveillance programme using media reports, advice from competitors and industry tip-offs to build up a picture of acquisitions underway in New Zealand each week.
In the last financial year the Commission had a preliminary look at almost 350 acquisitions and investigated about 100 of them.
Two-thirds of the investigations found dominance concerns did not arise. After investigation, the rest either did not proceed or the parties applied for clearance or authorisation.
The process the Commission uses to analyse applications is outlined in its Business Acquisition Guidelines, soon to be released in a draft form.
It involves defining the acquisition and the relevant markets, and analysing the ability of actual and potential competitors, buyers and suppliers to constrain the new organisation should the acquisition go ahead.
The Act also gives it the power to use search warrants, and to require people to provide documents, written answers to questions or to appear before the Commission to give evidence, under oath if necessary.
"The Commerce Commission takes a completely neutral attitude to mergers," Dr Bollard said. "We are neither for them nor against them - we simply apply the appropriate legal test to each one."
Media contact:Communications Officer, Vincent Cholewa
Phone work (04) 498 -0920, home (04) 479 1432