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

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