NZ Commerce Commission Disappointed In High Court’s Warehouse Decision

LAWFUEL – Legal Newswire – The Commerce Commission is disappointed by the High Court’s decision allowing the appeals of the three Foodstuffs co-operatives and Woolworths Ltd against the Commission’s decision declining clearance for either party to acquire up to 100% shares in, or assets of, The Warehouse Group Ltd.

The Commission remains concerned about competition in the supermarket sector where there is, in effect, a duopoly at present, except in the three regions where the Warehouse has opened a supercentre.

The Commission declined clearance for either acquisition because New Zealand’s supermarket retail market is already highly concentrated. There are high barriers to entry in the industry, yet the Warehouse is uniquely placed to compete with the supermarkets because of its existing property portfolio, extensive distribution networks and established brand.

Commerce Commission Chair Paula Rebstock says “In coming to its decision the Commission considered that The Warehouse, both as an actual competitor in the three local markets where it has opened supercentres, and as a potential competitor in markets where it might open new supercentres, brought an important new source of competition. Consumers were already benefitting from greater competition where the supercentres exist.”

“The Commission’s decision was not only about the risk of eliminating the existing competition of the three Warehouse Extra stores, but also about the elimination of the potential for further competition,” says Ms Rebstock.

The Commission is studying the judgment and will consider whether or not it will appeal the decision.

No further comment will be made until the full reasons for the judgment are released publicly by the High Court.

Background

Applications and decision. On 21 December 2006 the Commission received an application from the three Foodstuffs co-operatives seeking clearance to acquire up to 100% of the ordinary shares in The Warehouse Group Limited. On 17 January 2007 the Commission received an application from Woolworths Limited seeking clearance to acquire up to 100% of the shares in, or assets, of The Warehouse Group Limited. On 8 June the Commission declined to grant clearance for either acquisition, on the basis that it was not satisfied that either of the proposed acquisitions would not have, or would not be likely to have, the effect of substantially lessening competition in relevant markets.

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