Page 20 - English-DBINZ brochure-2019

17 Doing business in New Zealand

The Commerce Act applies to transactions that occur in New Zealand, as well as transactions that occur
outside New Zealand but have effects in New Zealand. For example, the Commerce Act will apply if the
merging parties have subsidiaries in New Zealand, or have controlling interests in
New Zealand companies. “Controlling interests” can arise in a number of different ways, including
through control of the composition of the board, a 20% or more ownership interest, control of voting
rights, and entitlements to dividends.

Clearances and authorisations
There is no compulsory notification regime in New Zealand for proposed mergers or acquisitions.
However, businesses may apply for a clearance or an authorisation from the Commerce Commission if
there is a risk (or a perceived risk) that a proposed merger or acquisition may breach the Commerce Act.
The Commerce Commission may grant clearance for an acquisition where it is satisfied that an
acquisition will not, or will not be likely to, have the effect of substantially lessening competition in the
relevant market.
Alternatively, if a proposed merger or acquisition is likely to substantially lessen competition in the
relevant market, the relevant business may apply for an authorisation for the merger. In order to grant
an authorisation, the Commerce Commission must be satisfied that any lessening of competition is
outweighed by the public benefits of the transaction.

Concentration indicators
The Commerce Commission uses market share and concentration indicators to identify those mergers
that are less likely to raise competition concerns. Specifically, the two indicators that a merger is less
likely to raise competition concerns are:

Indicator 1 Where, post-merger, the three largest entities in the market have a combined
market share of less than 70%, and the merged entity’s market share is less
than 40%.

Indicator 2 Where, post-merger, the three largest entities in the market have a combined
market share of 70% or more, and the merged entity’s market share is less
than 20%.

An acquisition that falls outside the indicators may still not have the effect of substantially lessening
competition in the relevant market. A business can apply for clearance from the Commerce Commission
if it believes that the acquisition will not result in the substantial lessening of competition. Alternatively,
a business may apply for authorisation from the Commerce Commission.
Business acquisition penalties
For a breach of the business acquisition provisions, individuals may be penalised up to NZ$500,000.
Companies may be penalised up to NZ$5m.

Companies may also be ordered to dispose of any assets or shares acquired in contravention of the
Commerce Act.

“For a breach of the business acquisition provisions,
individuals may be penalised up to NZ$500,000.
Companies may be penalised up to NZ$5m.”