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Court of Appeal confirms NZ Bus Comm. Act Breach

Court of Appeal confirms NZ Bus Commerce Act Breach

The Court of Appeal has upheld a High Court ruling that New Zealand Bus Limited (NZBL) breached section 47 of the Commerce Act, which prohibits business acquisitions that are likely to substantially lessen competition.

In June 2006, the Wellington High Court ruled that NZBL's attempted purchase of the 74% of Mana Coach Services that it did not already own breached section 47 of the Commerce Act. The Court determined that the acquisition was likely to substantially lessen competition in the Wellington regional market for rights to supply subsidised scheduled public and school bus services.

The High Court found that NZBL had breached the Commerce Act when its offer to buy the shares became unconditional. The High Court also found that certain vendors of the Mana shares had breached the Act as accessories to the prohibited acquisition. However, the Court refused to impose liability against NZBL's parent Infratil for its role in the transaction.

The High Court subsequently ordered NZBL to pay $500,000 in penalties and around $600,000 in litigation costs.

NZBL and Infratil appealed the High Court's decisions on liability, penalty and costs. The Commerce Commission cross-appealed the level of penalty ordered against NZBL and the Court's decision not to impose liability on Infratil.

Yesterday, the Court of Appeal dismissed NZBL's appeal from the High Court's finding that NZBL breached section 47. All other issues raised in the appeal proceedings remain to be determined by the Court of Appeal.

Commerce Commission Chair Paula Rebstock says "Although there are still further decisions to come relating to liability and penalties, this finding confirms the Commission's view that a purchase of Mana Coach services by NZBL would lessen competition in scheduled public bus and school services in the Wellington region."

"The is important because competition is one of the most effective means of enabling lower prices and better services to consumers," says Ms Rebstock.

Background
New Zealand Bus Limited is a wholly owned subsidiary of Infratil Limited. It is the 100% holding company for Wellington City Transport Limited, Cityline (NZ) Limited and Transportation Auckland Corporation Limited, which operate the New Zealand bus businesses known as Stagecoach Wellington, Cityline Hutt Valley and Stagecoach Auckland.

Mana Coach Services was, at the time of the breach, a family owned and managed business that operated Mana Coach Services and Newlands Buses. It is now owned by Bancorp New Zealand Limited, a merchant bank business. .Mana Coach Services operates commuter and passenger bus services within north Wellington, Porirua and the Kapiti coast, as well as a service to the Paraparaumu rail line for Wellington city connections, and coach charter business.

Commerce Act
Under section 47 of the Commerce Act, a person must not acquire assets of a business or shares if the acquisition would have, or would be likely to have, the effect of substantially lessening competition in a market.

ENDS

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