Howard Smith to acquire business group from OPSM

Media Release

Issued 28 June 2001/78

Commission clears Howard Smith to acquire business group from OPSM Protector Limited

The Commerce Commission today cleared Howard Smith Limited to acquire OPSM Protector Limited's Protector Supply Group.

Commissioner Paula Rebstock said that the decision relates to OPSM's distribution business only, and not its manufacturing business.

Both companies are listed on the Australian Stock Exchange and are involved in the supply of personal and industrial safety equipment and clothing. The relevant New Zealand subsidiaries of Howard Smith are NZ Safety Ltd, Benchmark Building Supplies Limited, and J Blackwood & Son (New Zealand) Ltd. OPSM Protector Ltd owns Protector Safety Supply Ltd in New Zealand.

Ms Rebstock said that the Commission was satisfied that, should the acquisition go ahead, the merged entity would not acquire or strengthen dominance in any market. In this case the relevant markets are national markets for the supply of:

* safety products, and * janitorial, hygiene and medical products.

The merged entity would have a significant share of the safety products market. Purchasers, including major industrial users, in this market have stated, however, that they would have other options if the merged entity tried to use its market power to increase prices or reduce services. Ms Rebstock said that the Commission was satisfied that the merged entity would be constrained by the countervailing power of purchasers.

In the market for janitorial, hygiene and medical products, the merged entity would have a market share well within the Commission's safe harbour guidelines, with existing competition providing considerable constraint.

The safe harbours are up to 40 percent market share or 60 percent if at least one competitor has 15 percent of the market or more.

"Having regard to all the relevant factors, the Commission is satisfied that the proposed acquisition would not result, or be likely to result, in any person acquiring or strengthening a dominant position in any market," Ms Rebstock said.

Background

Howard Smith made its application before amendments to the Commerce Act took effect on May 26.

Before the amendments, the Act prohibited business acquisitions that resulted in dominance being acquired or strengthened in a market. The amended Act prohibits acquisitions that substantially lessen competition (SLC) in a market.

The Commission took the view that applications on hand at May 26 should be investigated under the law as it was when the applications were made.

Yesterday, the Auckland High Court released a judgment upholding the Commission's view and ruling that the dominance test should be applied.

Ms Rebstock said that it is important to note that the Court's decision applies to only those applications on hand at May 26. Applications made on or after May 26 will be investigated under the SLC test.

ENDS

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