Commission clears Carglass to acquire Smith & Smith automotive glass businesses
12 March 1998
The Commerce Commission today cleared Carglass (N.Z.) Limited to acquire the retail automotive glass businesses of Smith & Smith Limited.
Commission Member Terry Stapleton said that the Commission was satisfied that, should the acquisition go ahead, Carglass would not acquire or strengthen a dominant position in any market.
The Commission concluded that the markets relevant to the acquisition were those for retail:
? repair of automotive glass in New Zealand; and
? replacement of automotive glass in New Zealand.
The Commission's overall conclusion is that while the acquisition would result in aggregation in both markets, existing competition and the substantial countervailing power of major customers would constrain the combined entity and would prevent it acquiring a dominant position in either market.
While franchise chain, Novus Windscreen Repair and Replacement, is the only other market participant providing a nationwide service, many other companies provide regional services.
In the market for retail repair of automotive glass in New Zealand, the combined entity would have a smaller market share than Novus and would be within the Commission's "safe harbour" of less than 40 percent market share.
In the market for retail replacement of automotive glass in New Zealand, the combined entity would have a considerably larger share. It would be outside the Commission's safe harbour of less than 60 percent market share with at least one competitor having 15 percent or more of the market.
However, the major customers in the replacement market, insurance companies, have considerable buying power, and the Commission concluded that they would constrain the combined entity sufficiently to prevent it acquiring a dominant position.
Insurances companies told the Commission that they generally prefer to have national contracts and would probably lose some of their bargaining power if the acquisition goes ahead. However, they also said that they have previously used regional contracts - and some still do - and would go back to them if the combined entity increased prices or reduced services significantly.
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any markets. Parties can apply for a clearance, which will be granted if the Commission is satisfied that dominance is not acquired or strengthened.
The Business Acquisitions Guidelines published by the Commission state two safe harbours within which dominance is unlikely to be acquired or strengthened. These are:
? a post acquisition market share of less than 40 percent; and
? a post acquisition market share of less than 60 percent if at least one competitor has no less than 15 percent.
Media contact: Commerce Act Manager Jo Bransgrove
Phone work (04) 498 0958
Communications Officer Vincent Cholewa
Phone work (04) 498 0920
Commission media releases can be viewed on its website www.comcom.govt.nz