First BA Application Under SLC Test
Commission investigates first business acquisition application under amended Commerce Act: PMI / CGU
The Commerce Commission is investigating the first application for clearance of a business acquisition under the amended Commerce Act.
The Commission's Business Competition Branch Director, Geoff Thorn, said that the application is from PMI Mortgage Insurance Australia (Holdings) Pty Limited to acquire all shares in or assets of CGU Lenders Mortgage Insurance Limited.
PMI operates in New Zealand as a branch of its Australian parent company and CGU operates here as a branch of its UK-based parent. Both companies provide lenders mortgage insurance in New Zealand.
Mr Thorn said that the amended Act prohibits business acquisitions that substantially lessen competition (SLC) in a market. Before the amendments the Act prohibited acquisitions that resulted in dominance being acquired or strengthened in a market.
The Commission has explained how it intends to apply the new SLC test in Practice Note 4, The Commission's Approach to Adjudicating on Business Acquisitions Under the Changed Threshold in Section 47-a Test of Substantially Lessening Competition. Practice Note 4 was published on May 28, and is available from the Commission's website, www.comcom.govt.nz, and reception at its Wellington office.
"The first decisions the Commission makes under the SLC test will set out in as much detail as possible how it intends to apply the guidelines it has published," Mr Thorn said.
"The first few decisions will obviously be important to the parties involved, and they will also be important as a guide to all businesses considering acquisitions."
The Commission expects to make its decision on July 16.