Commission grants clearance for Godfrey Hirst’s proposed acquisition of Bremwort…

In New Zealand, one of Mohawk’s interconnected bodies corporate is Godfrey Hirst New Zealand Limited.

In reaching its decision, the Commission considered the potential impact of the proposed acquisition on the market for the wholesale supply of soft flooring products. The products within this market are highly differentiated, with the two main types of soft flooring products comprising synthetic carpet and wool carpet, both of which are available at varying price points, quality levels and colours.

The Commission initially raised concerns about the acquisition, but Committee Convenor Dr Derek Johnston says, after further investigation, the Commission is satisfied that the acquisition is unlikely to substantially lessen competition in the soft flooring market.

Both Godfrey Hirst and Bremworth are large domestic manufacturers of soft flooring products that have supplied the New Zealand market for over 50 years. Bremworth stopped supplying synthetic carpet in 2020 such that, in recent years, Godfrey Hirst and Bremworth have almost exclusively competed to supply wool carpets only. Bremworth recently re-introduced a limited range of synthetic carpet within the last year.

Wool carpet was historically the most popular soft flooring product sold in New Zealand, but this is no longer the case. Synthetic carpet has grown in popularity and now accounts for the predominant share of soft flooring products sold in New Zealand. The majority of synthetic carpet is supplied by competitors who import the product into New Zealand, and these imports compete with the carpet supplied by both Godfrey Hirst and Bremworth.

“The proposed acquisition would remove the existing competition between Godfrey Hirst and Bremworth, with the loss of competition being most acute in relation to the supply of wool carpets, which is where the merging parties are the largest current suppliers,” Dr Johnston says.

“However, in the context of the broader soft flooring market, the Commission recognises that the predominant share of carpet that is supplied in New Zealand is synthetic carpet, and that the merged entity would be constrained by existing competitors that supply synthetic and/or wool carpets, and also by consumers and retailers switching between different types of carpet in response to a relative price increase.

“After assessing all of the information before it, the Commission considers that the loss of competition as a result of the proposed acquisition is unlikely to constitute a substantial lessening of competition in the wider soft flooring market.”

A public version of the written reasons for the decision will be available on the Commission’s case register in due course.

Background

We will only give clearance to a proposed merger if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market.

Further information explaining how the Commission assesses a merger application is available.