Commission declines clearance for Kegstar’s proposed acquisition of Konvoy
The Commerce Commission has declined to give clearance to Kegstar New Zealand Limited to acquire the kegs, beacons attached to those kegs or held in inventory, and the New Zealand keg records from Konvoy New Zealand Limited.
Kegstar and Konvoy both supply PPF (or pay-per-fill) services to breweries and other similar customers. PPF services allow customers to effectively ‘rent’ the use of kegs and outsource the return logistics of those kegs.
The merger proposed bringing together the only providers of PPF services in New Zealand.
Chair Dr John Small said that the Commission was not satisfied that the merger would not have the effect of substantially lessening competition in the market for the supply of PPF services in New Zealand.
“The evidence gathered by the Commission indicated that Kegstar and Konvoy compete closely for the supply of PPF services to customers, and the merger would eliminate this competition. Our investigation showed that there are no existing competitors that could constrain the merged entity, and that entry from a new competitor is unlikely,” Dr Small says.
“We were not satisfied that the ability of some customers to self-supply instead of using PPF services would be sufficient to prevent an exercise of market power by the merged entity.
“In addition, absent the Proposed Acquisition, we consider there is a real chance that Konvoy or its assets would remain in the relevant market to operate or be used in competition with Kegstar.
“We therefore could not exclude a real chance that the merger would result in a substantial lessening of competition for PPF services, resulting in price rises to customers and/or a lower quality of service offering.”
The Commission is only permitted to grant clearance to an acquisition when it is satisfied it will not have, or would not be likely to have, the effect of substantial lessening of competition in a market.
The Commission sought several extensions of time from Kegstar over the course of its consideration of the merger, because the merging parties had not - at the time it sought the extensions - satisfied the Commission that the proposed acquisition would not substantially lessen competition. In each case, the applicant agreed to the requested extension.
A public version of the Commission’s written reasons for the decision is now available on the Case Register.
Background
The proposed acquisition is also under investigation by the Australian Competition & Consumer Commission (ACCC). Details of the ACCC’s investigation can be found on its case pageopen_in_new.
When considering a merger clearance application, the Commission must focus on whether any competition that would be lost with the merger would be substantial. We will give clearance to a proposed merger only 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 on our website.