Mergers Discussion Commerce Commission, Auckland and Wellington 25 - - PowerPoint PPT Presentation

Commerce Commission, Auckland and Wellington

25 and 30 October 2018

Mergers Discussion

Commission vision

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What we’re going to talk about

• Who we are and what we do
• How we analyse mergers
• Interesting statistics – outcomes and timeframes
• Global trends, and where does NZ fit
• Challenges
• Process review

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NZ’s merger control regime

• Section 47 prohibits mergers that would be likely to

substantially lessen competition (SLC)

• Voluntary clearance or authorisation
• Effect is to immunise from enforcement proceedings

by Commission or third parties under s 47

• We proactively monitor market for mergers that raise

concerns

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Who’s involved at the Commission

• Dedicated Mergers Investigations team
• Assesses clearances, authorisations, and s 47 investigations
• Each case has an investigation team
• Investigators
• Economist
• Lawyer
• Oversight by Steering Group: Head of Competition, Mergers Manager,

Chief Economist, Deputy General Counsel (Competition)

• Division of Members:
• decides clearances/authorisations
• decides whether to issue proceedings under s 47

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Clearances – steps and timing

FY10/11 to FY17/18

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Pre- notification 3-4 weeks Application registered Day 0 Letter of Issues Day 40 LOUI Day 79 Decline Day 117

Clearances

40 days 89 days 116 days

Our approach to analysing mergers

• Mergers can harm competition by:
• directly eliminating competition between two

competitors (horizontal unilateral effects)

• making coordination more likely between the remaining

competitors in the market (horizontal coordinated effects)

• foreclosing competitors:

– Vertical effects – Conglomerate effects

• See: Mergers and Acquisitions Guidelines at

https://comcom.govt.nz/business/merging-or-acquiring-a- company

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Interesting statistics

• Around 100 M&A transactions a year in NZ
• 8-12 clearances a year (authorisations are relatively rare

– 8 since 2000 compared to 297 clearances)

• Second least number of reviews of any agency
• Because we have a voluntary clearance regime, most

mergers proceed without us reviewing them

• Lower regulatory burden than compulsory

notification jurisdictions

• Published stats: https://comcom.govt.nz/about-

us/strategic-planning-and-accountability- reporting/mergers-and-trade-practices-statistics

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Clearances – what’s the pass rate?

* FY10/11 – FY17/18

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Application 82 Letter of Issues 30 LOUI 19 Decline 10

Clearances 68

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(6 divestments)

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(2 divestment)

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(1 divestment)

Clearance timeframe

10 32 64 67 60 64 60 82 77 30 40 50 60 70 80 90 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 Working Days Financial years

Average working days to decision

Priority area: non-notified mergers

• Commission priorities for 2018/19 now public
• In the last two years we have seen an increase in

non-notified mergers that we need to investigate further

• 5 investigations completed in 2017/18
• Filed proceedings in 2 cases (Platinum; Wilson Parking)
• Fulton Hogan/Stevenson – carved assets out of deal in

response to CC concerns

• Commitment to act quickly to prevent any harm from non-

notified mergers which may SLC

• Significant differences to clearance process – unlikely to be

LOI/LOUI

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International trends

• Increased focus on competition law; concern about market

concentration

• Mergers raising vertical effects issues, involving dynamic

markets and big data

• Number of mergers subject to remedies
• Increased review times for complex mergers

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International trends

Source: Financial Times

International trends

• Last 15-20 years have been dominated by

horizontal/unilateral effects concerns, with particular focus

• n price effects
• We are seeing a broader range of theories of harm:
• Vertical/conglomerate (AT&T/Time Warner; Trade

Me/Motorcentral)

• Coordinated effects (Tronox/Cristal; Vero/Tower)
• Common ownership (Dow/Dupont – “element of context”)
• Non-price effects – quality (NZME/Fairfax) and innovation

(Dow/Dupont)

• Buyer power

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International trends

• Internationally, timeframes for complex/contentious mergers

tend to be getting longer

• ACCC: “I think you will now see some lengthening of our

timelines on contentious mergers, but we will continue to have regard to commercial timing pressures”

• US DoJ: “we will try to close most investigations within six

months of filing – provided the merging companies cooperate”

• EC: review of Dow/DuPont – 6 months pre-notification;

15 months total

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How does NZ fit into this?

• Merger reviews decided on facts of each case
• Increased concentration, eg NZME/Fairfax, Vero/Tower
• We are faster than the average globally, taking 71 WDs compared

to the average of 92 WDs.

• But subject to same pressures re complex mergers
• increased levels of 3rd party interest; requests for disclosure

under OIA

• complexity of analysis – recent cases have involved two-sided

markets, fast evolving tech markets, vertical and conglomerate theories, multiple distribution channels, price discrimination, data

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Challenges

• Being quicker for simple, straightforward mergers
• Transparency – interaction of OIA regime with our

investigations

• No behavioural remedies

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Process review

• We have started a project to:
• update the process part of the Mergers and Acquisitions

Guidelines (focus on chapter 6)

• review the clearance application form to ensure it is fit

for purpose

• Consultation late 2018/early 2019

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Questions?

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