Source: Radio New Zealand
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The unintended consequences of proposed changes to competition law could add unnecessary cost to mergers and acquisitions, while undermining investor confidence, a prominent law firm says.
Chapman Tripp said some of the changes to the Commerce (Promoting Competition and Other Matters) Amendment Bill were positive, but others were problematic.
“Setting aside the several changes that we think have the potential to be really positive, for the ones we have concerns about, there are probably two categories,” Chapman Tripp competition and antitrust partner Lucy Cooper said.
“One is that they will add unnecessary uncertainty, time and cost to the Commerce Commission processes.
“And the other one . . . is the Commerce Commission will get a lot more discretion or power without solid process protections, or the ability to really scrutinise its work.
“I don’t intend that to be a criticism of the current Commission at all. It’s more that in general, as you know, proper process is absolutely critical to making sure we can see that the service we are getting from the Commerce Commission is robust and fair.”
She said a specific concern dealt with Commission’s ability to retroactively take action against a series of acquisitions that would, in hindsight, be found to have a cumulative effect of lessening competition.
“The focus should remain on the lawfulness of the marginal transaction, rather than allowing the Commission to retrospectively impugn earlier transactions that would otherwise be lawful if considered in isolation.
“Allowing the Commission to treat a sequence of separate transactions as a single transaction and find them all unlawful on the basis of their combined effect could also undermine investor confidence.”
Cooper said the Commission had an existing power to block a transaction, when it had potential to put a company or organisation in the position of becoming a dominant player in a particular market.
“The Commission already enforces against serial acquisitions, as demonstrated by successful action against Wilson Parking in local parking markets. We see no evidence that the Commission is unable to intervene in serial acquisitions.”
Chapman Tripp set out five factors of concern that “may, without limitation, be relevant” in determining whether a person had a substantial degree of influence.
The five factors were:
- Shareholding or voting rights that provide the ability to influence key decisions of the other person
- The right to appoint or remove directors or key executives of the other person
- Veto powers over strategic decisions of the other person
- Financial arrangements that create economic dependency on the part of the other person and,
- Contractual agreements, informal arrangements, or historical patterns of deference.
[EL]
Cooper said Chapman Tripp would be setting out its concerns in a submission to the Parliamentary Select Committee, with submissions closing on 4 February.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
