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Commission declines to clear RAL to acquire Turoa

Commission declines to clear RAL to acquire Turoa

June 14

Media Release 1999/72

The Commerce Commission today declined to clear the owner of the Whakapapa ski field, Ruapehu Alpine Lifts Limited (RAL), to acquire Turoa Ski Resort Limited.

The proposal would have resulted in the combined company owning the only two major ski fields in the North Island. This would have given it 98 percent of the North Island market.

Commission Acting Chairman Mark Berry said that the key issue in the Commission's decision was its definition of the relevant geographic market. RAL submitted that there is a nationwide market but the Commission concluded that there is a distinct North Island market for downhill skiing and snowboarding services.

Mr Berry said that central to the Commission's conclusion is the cost and convenience of transport. North Island skiers tend to drive to Mt Ruapehu but fly to South Island ski fields. For most North Island skiers it is a considerably more costly trip to a South Island ski field than to Mt Ruapehu. Also, all of them must cross Cook Strait.

"North Island skiers can make quick decisions to drive to Mt Ruapehu to ski for a day or a weekend," Mr Berry said. "It takes longer to plan a trip to the South Island, it must include ferry or plane travel and few would stay in the South Island for only a day or two.

"If a combined RAL/Turoa used its near monopoly power to make significant increases in prices for lift passes it would face little or no constraint from customers and competitors.

"It would still be more economical for most North Island skiers to accept an increase in prices of ski passes at Mt Ruapehu than it would be for them to travel to the South Island."

The two North Island club fields, at Mt Ruapehu and at Mt Taranaki, would be unlikely to provide effective competition. These fields can take only a small number of skiers. Their lifts are limited to rope tows and road access is considerably more difficult than to Whakapapa and Turoa.

There are also considerable barriers to the club fields expanding. This would require their reclassification from "low impact" to "commercial" ski fields, involving full environmental assessments, Resource Management Act consents and other regulatory approvals. In addition there would be considerable costs in upgrading road access and lift facilities.

A potential new entrant would face similar barriers to entry and its costs would probably be even higher. Background

The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any market. Parties can apply for a clearance, which the Commission will grant if it is satisfied that dominance is not acquired or strengthened.

Mr Berry said that in this case, the Commission was not satisfied that, should the proposal go ahead, a combined RAL/Turoa would not be dominant in the North Island market for downhill skiing and snowboarding services.

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