Lowe Corp cleared to acquire Colyer Mair
Issued 27 July 2001/86
Last business acquisition decision under dominance test: Commission clears Lowe Corp to acquire Colyer Mair
The Commerce Commission today made its last business acquisition decision using the dominance test that had been in force until the Commerce Act was amended.
Commission Chair John Belgrave said that the Commission cleared Lowe Corporation Limited to acquire Colyer Mair Limited. Both companies process animal skins for use in leather manufacturing.
Lowe Corporation's application was one of 11 the Commission had on hand when amendments to the Commerce Act took effect on May 26. All 11 of those decisions have now been made.
The amended Act prohibits acquisitions that substantially lessen competition (SLC) in a market.
The Commission took the view that applications should be investigated under the law as it was when the applications were made. That is, the dominance test would apply to applications made before May 26, and SLC test would apply to those made on May 26 or later.
Foodstuffs (Auckland) Limited challenged this view, arguing that the SLC test applied to applications on hand at May 26. The Auckland High Court upheld the Commission's view. Foodstuffs has appealed the High Court decision, and the appeal will be heard in the Court of Appeal on August 13.
In the Lowe Corporation case, the Commission was satisfied that, should the proposal go ahead, Lowe Corporation would not acquire or strengthen dominance in any market. The relevant markets in this case were:
* the North Island market for the acquisition and supply of fellmongery services * the North Island market for the acquisition and supply of tanning services * the national market for the supply of semi-processed leather.
The acquisition did not involve any aggregation in South Island markets.
The Commission recognised that the merged entity provided a high proportion of tanning and fellmongery services to non-vertically integrated meat processing businesses.
However, the Commission concluded that in the North Island fellmongery market the merged entity would be constrained by the current and potential processing capacity of existing competitors, and by the potential for new entry. If the merged entity attempted to use its market power existing competitors could increase processing, and meat processors could provide fellmongery services to themselves and to other independent meat processors.
In the North Island tanning market, the strength of existing competitors and their ability to increase processing would constrain the merged entity.
The Commission also recognised that in both markets the merged entity would be highly sensitive to the loss of supply from meat processors. Hence, the ability of meat processors to divert supply to other tanneries or fellmongeries would act as a constraint on the merged entity.
The proposal would result in minimal aggregation in the national market for the supply of semi processed leather
"For the combination of these reasons the Commission was satisfied that the proposal would not result in dominance being acquired or strengthened and so gave a clearance," Mr Belgrave said.