Commission clear Solid Energy to acquire customers
Commission clears Solid Energy to acquire Francis Mining's retail customers
Media Release 2000/70
The Commerce Commission has cleared Solid Energy New Zealand Limited to acquire the retail customers of Francis Mining Limited.
Both Solid Energy, which is state-owned,
and Francis Mining mine, process, market and distribute
coal.
Commission Deputy Chair Mark Berry said that
the Commission was satisfied that Solid Energy would not
acquire or strengthen dominance in any market. The proposal
would lead to aggregation in only one market, that for the
distribution of sub-bituminous and bituminous thermal coal
in the northern half of the South Island.
The
proposal would see the transfer of various contracts from
Francis Mining to Solid Energy and a restraint of trade
agreement preventing Francis Mining competing for these
customers for a defined period of time.
The
acquisition would give Solid Energy a market share outside
the "safe harbours" published by the Commission in its
Business Acquisitions Guidelines. The safe harbours are up
to 40 percent market share or up to 60 percent market share
if at least one competitor has 15 percent or more of the
market.
The Commission has concluded that several
factors would constrain Solid Energy and prevent it
acquiring a dominant position in the distribution market.
These factors are:
the acquisition would affect only a small segment of the market for a limited amount of time
during that time, purchasers would receive protection under the terms of their contracts
following the expiry of the contracts and before the expiry of the restraint of trade agreement, the purchasers appear to have options for the supply of coal
existing competitors could expand quickly if Solid Energy attempted to use its market position to increase prices, or reduce production or quality of service, and
new competitors can enter the market.
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 its satisfied that dominance is not
acquired or strengthened. A clearance, if granted, protects
an acquisition from court action under the
Act.
Public copies of the Commission’s decision
will soon be available from its website, www.comcom.govt.nz,
and are available from reception at its Wellington office,
level 7 Landcorp House, 101 Lambton Quay.
Media contact: Senior Advisor Communications Vincent Cholewa
Phone work (04) 498 0920