Merger control plays a key role not only in the competition regulation ecosystem, but also the M&A and investment environment.
Mergers can give rise to tremendous efficiencies and public benefits. They can allow, for example, a start-up to get access to significant funding for research and development that it would never be able to get on its own. They can also open doors for New Zealandbased companies to access new markets. And they can enable exiting founders to reap the rewards of their hard work and move on to the next challenge, at the same time provide inspiration for others to follow in their footsteps.
A predictable and efficient M&A ecosystem makes New Zealand an attractive place to do business. The Commission forms an important part of this ecosystem, alongside other regulators such as the Overseas Investment Office (OIO), the Takeovers Panel and Financial Markets Authority (FMA).
It is generally accepted that the vast majority of M&A activity is not anticompetitive. 2 However, a small percentage of mergers do impact competition, and their effects can be significant and long-lasting. Merger control is necessary to prevent such mergers, or to put in place appropriate safeguards (remedies) that prevent or mitigate their effects.
Merger control therefore needs to walk the line between allowing non-harmful mergers to proceed, while at the same time ensuring that harmful mergers do not (or proceed only with appropriate measures to address competition concerns).
In walking this line, it is not just the end result that matters – the process for getting there is equally important. Thus, according to the International Competition Network (ICN) Merger Working Group (MWG) Recommended Practices for Merger Notification and Review Procedures (Recommended Practices), 3 merger control should promote effectiveness, efficiency, predictability and transparency:4
“… Effectiveness, efficiency, transparency and predictability are fundamental attributes of a sound merger control regime, and these objectives should be pursued at all stages of the merger review process. During the investigative stage, achieving these objectives can be facilitated by adopting procedures that address recurring issues encountered by the competition agency and merging parties in the merger review process and by adopting practices designed to focus the investigation on relevant legal and factual issues as promptly as possible and to resolve any perceived competitive concerns expeditiously
… These objectives can best be achieved if there is a frank and open dialogue between the competition agency and the merging parties. The cooperation of the merging parties is a key factor in the competition agency’s ability to pursue these objectives most effectively.â€
Put succinctly, merger control processes should:
- deal with recurring issues;
- focus on legal and factual issues to resolve any concerns expeditiously; and
- promote frank and open dialogue between the competition agency and the merging parties.
This paper
This paper examines New Zealand’s merger control processes in light of the above framework. The paper is divided into four parts. Parts 1 and 2 follow the sequence of a clearance process from courtesy letter through to SOUI. 5
- Part 1 examines the pre-filing and phase 1 stages of the merger clearance and authorisation processes. It covers ‘courtesy letters’, ‘call-ins’, pre-notification and SOPIs
- Part 2 discusses the processes for more complex merger assessments, and some of the key issues that arise. It covers Statements of issues (SOIs) and Statements of Unresolved Issues (SOUIs), confidentiality and access to file.
- Part 3 is a very short section that examines the Commission’s merger control KPIs, as detailed in its Statement of Performance Expectations. 6
- Part 4 concludes.
The paper finds that, while there are aspects of New Zealand’s merger control processes that are working well (eg the courtesy letter process), there are opportunities for improvement. In particular, the processes for assessing complex mergers (those that proceed past an SOI) and granting access to confidential information could be made more streamlined and predictable, respectively.
