The Commerce Commission today cleared Nelson Pine Industries Limited (NPIL) to acquire Rayonier MDF New Zealand, which is Rayonier's medium density fibreboard plant at Mataura.

MDF is a wood-based panel product made from wood fibre and resin. It is produced as sheets that are used for interior construction, predominantly kitchens, furniture and cabinetry.

Commission Chair John Belgrave said that the Commission was satisfied that, should the proposal go ahead, NPIL would not acquire or strengthen dominance in any market.

In this case the relevant markets were the:
* national market for the manufacture and supply of MDF
* Nelson/Marlborough market for the supply and acquisition of wood fibre, and
* Otago/Southland market for the supply and acquisition of wood fibre.

Mr Belgrave said that the Commission concluded that the merged entity would be constrained by buyers and existing competitors.

The buyers, who in this market are wholesale distributors and large manufacturers of kitchens and furniture, told the Commission that they are prepared to switch to different suppliers if prices or service quality changed.

The competitors, Fletcher Wood Panels Limited and Carter Holt Harvey's subsidiary Canterbury Timber Products Limited, have the ability to increase the amounts of MDF that they supply to the New Zealand market.

There is also some scope for importing MDF from Australia.

The Commission also concluded that the proposal is unlikely to have any effect on the two regional wood supply markets. NPIL acquires its wood fibre from forests in the Nelson/Marlborough region and Rayonier acquires its wood fibre in the Otago/Southland region. There would be no aggregation of market power in either market.

Public copies of the Commission's decision will be available soon.

Background

NPIL made its application before amendments to the Commerce Act took effect on May 26. At that time the Act prohibited business acquisitions that resulted in dominance being acquired or strengthened in any market. The amended Act prohibits business acquisitions that substantially lessen competition in any market.

The Commission must use the dominance test when it investigates applications made before May 26 and the substantial lessening test when it investigates applications made on or after May 26.

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