Mergers Discussion Commerce Commission, Auckland and Wellington 25 and 30 October 2018
Commission vision 2
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 3
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 o by Commission or third parties under s 47 • We proactively monitor market for mergers that raise concerns 4
Who’s involved at the Commission • Dedicated Mergers Investigations team • Assesses clearances, authorisations, and s 47 investigations • Each case has an investigation team Investigators o Economist o Lawyer o • Oversight by Steering Group: Head of Competition, Mergers Manager, Chief Economist, Deputy General Counsel (Competition) • Division of Members: decides clearances/authorisations o decides whether to issue proceedings under s 47 o 5
Clearances – steps and timing FY10/11 to FY17/18 Pre- Application Letter of LOUI Decline notification registered Issues Day 79 Day 117 3-4 weeks Day 0 Day 40 40 days 89 days 116 days Clearances 6
Our approach to analysing mergers • Mergers can harm competition by: directly eliminating competition between two o competitors (horizontal unilateral effects) making coordination more likely between the remaining o competitors in the market (horizontal coordinated effects) foreclosing competitors: o – Vertical effects – Conglomerate effects • See: Mergers and Acquisitions Guidelines at https://comcom.govt.nz/business/merging-or-acquiring-a- company 7
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 o mergers proceed without us reviewing them Lower regulatory burden than compulsory o notification jurisdictions • Published stats: https://comcom.govt.nz/about- us/strategic-planning-and-accountability- reporting/mergers-and-trade-practices-statistics 8
Clearances – what’s the pass rate? * FY10/11 – FY17/18 Application Letter of Issues LOUI Decline 82 30 19 10 10 8 50 (1 divestment ) (2 divestment ) (6 divestments) Clearances 68 9
Clearance timeframe Average working days to decision 90 82 77 80 67 70 Working Days 64 64 60 60 60 50 40 32 30 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 Financial years 10
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 o Filed proceedings in 2 cases (Platinum; Wilson Parking) o Fulton Hogan/Stevenson – carved assets out of deal in o 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 11
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 12
International trends Source: Financial Times 13
International trends • Last 15-20 years have been dominated by horizontal/unilateral effects concerns, with particular focus on price effects • We are seeing a broader range of theories of harm: Vertical/conglomerate (AT&T/Time Warner; Trade o Me/Motorcentral) Coordinated effects (Tronox/Cristal; Vero/Tower) o Common ownership (Dow/Dupont – “element of context”) o Non-price effects – quality (NZME/Fairfax) and innovation o (Dow/Dupont) Buyer power o 14
International trends • Internationally, timeframes for complex/contentious mergers tend to be getting longer ACCC: “I think you will now see some lengthening of our o 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 o months of filing – provided the merging companies cooperate” EC: review of Dow/DuPont – 6 months pre-notification; o 15 months total 15
How does NZ fit into this? • Merger reviews decided on facts of each case Increased concentration, eg NZME/Fairfax, Vero/Tower o • 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 3 rd party interest; requests for disclosure o under OIA complexity of analysis – recent cases have involved two-sided o markets, fast evolving tech markets, vertical and conglomerate theories, multiple distribution channels, price discrimination, data 16
Challenges • Being quicker for simple, straightforward mergers • Transparency – interaction of OIA regime with our investigations • No behavioural remedies 17
Process review • We have started a project to: update the process part of the Mergers and Acquisitions o Guidelines (focus on chapter 6) review the clearance application form to ensure it is fit o for purpose • Consultation late 2018/early 2019 18
Questions? 19
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