Commission authorises RAL to acquire Turoa
Issued 14 November 2000/116
Commission authorises RAL to acquire Turoa
The Commerce Commission today authorised Ruapehu Alpine Lifts Limited ("RAL") to acquire the assets and operations of Turoa Ski Resorts Limited (in receivership).
Commission Chair, John Belgrave, said that the Commission's decision is that although RAL would be dominant in the North Island skiing market if the proposal went ahead, the public benefits from the acquisition would be greater than the detriments.
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any market, but allows exemptions-called authorisations-if the Commission is satisfied that benefits from a proposal outweigh its detriments.
Mr Belgrave said that as a result of the submissions from the public, RAL and others in the industry following the release of its draft determination, the Commission received valuable additional information.
A number of the submissions expressed the view that all ski fields in New Zealand made up one market, and that the North Island ski fields were part of this same market. In addition some submissions suggested that other winter leisure activities and winter break holidays to Australia and the Pacific Islands should also be considered in the one market.
However, the Commission's investigation has shown that for North Islanders a ski trip package to the South Island is considerably more expensive that a similar ski trip to Mt Ruapehu. So although there will be some North Islanders who are able or willing to pay extra to ski in the South Island, for the majority of North Island skiers this is not an economic option.
Likewise, the Commission has found that although some people will choose to take a winter break holiday overseas instead of going skiing, it considers on balance that skiing is, by its very nature, a relatively specialised sport. Consequently, the Commission found that there is a separate market for skiing, which is distinct from a wider leisure market.
"Therefore, despite some competition at the fringe, we confirmed our earlier finding of a North Island market for skiing in which RAL would be dominant," Mr Belgrave said.
The Commission has considered the detriments that are expected to arise from the loss of competition caused by RAL acquiring a dominant position in the market. The Commission considers that the detriments fall into four categories.
First RAL may be able to reduce output and charge more (allocative inefficiency). Secondly, the quality of RAL's product or service may also deteriorate (productive inefficiency). Thirdly, the absence of competitive pressure means that RAL could afford slackness or waste and still be profitable (product quality). And fourthly there is an absence of pressure to be innovative in order to beat the competition (innovative inefficiency).
Mr Belgrave said that against these detriments, the Commission then considered the public benefits that would accrue if the proposal were authorised. The benefits come from cost savings that would be possible by removing duplication between the two ski fields, as well as an increase in skier-days from combined management and promotion of the two fields, and the flow-on effects for the Ruapehu region.
RAL has said that it would introduce season and day passes that would allow skiers to ski on either ski field, as well as introducing a guided traverse that will allow skiers to move between the fields during a day. In addition RAL believes that it will be in a stronger position to market skiing on Mt Ruapehu internationally, and in particular to Australian skiers.
Mr Belgrave said that after considering both the detriments and the benefits, the Commission concluded, on balance, that the benefits would be greater than the detriments, and therefore has authorised the acquisition.
Market definition, competition analysis and benefits and detriments are discussed in detail in the Commission's 118-page decision. Copies of the decision are available from the Commission's website, www.comcom.govt.nz
Media contact: Commerce Act Manager Geoff Thorn Phone work (04) 498 0958, cellphone 021 661 104
Senior Advisor Communications Vincent Cholewa Phone work (04) 498 0920, home (04) 473 3827
Commission media releases can be viewed on its web site www.comcom.govt.nz