Alderson Logistics Limited and associated company Supa Shavings (2022) Limited have been ordered by the High Court to pay a NZD 420,000 penalty for acquisitions that substantially lessened competition in a market.
Commerce Commission Chair Dr John Small said the outcome served as an important reminder that acquisitions of this nature are illegal in New Zealand.
“The Commerce Act is clear, in New Zealand, a person or business must not acquire assets of another business or shares if the effect, or likely effect, is a substantial lessening of competition in a market,” said Dr Small.
In May 2022, Alderson Logistics and Supa Shavings (2022) acquired the assets of ABS Carriers Limited and Supa Shavings Limited. Those companies supplied wood shavings for bedding to chicken and goat farmers in the Waikato region.
Pre-acquisition, ABS Carriers and Supa Shavings were the largest suppliers of bulk wood shavings in the region. They had a combined market share of at least 70-80 percent. The companies were each other's closest competitors and, when those assets were acquired, that competition was eliminated.
“The Commission was not notified about the acquisition, so this case is an important reminder that while our clearance regime is voluntary, we can take action against mergers or acquisitions where clearance was not sought.”
In her judgment, Justice Gardiner noted Alderson and Supa Shavings (2022) accepted that they gained commercially from the acquisitions for around 13 months, until a shavings supply shock in June 2023 affected their profitability from that date.
The companies also accepted that, up until around November 2024, other suppliers in the same markets supplied on an ad hoc basis only, had a small market share and did not constrain Alderson and Supa Shavings (2022) in those markets, “including from increasing prices above competitive levels.”
Gardiner noted that the companies could not point to their lack of profitability to establish that they had not gained from the acquisitions without undertaking an analysis of what their profits would have been if the acquisitions had not occurred, and competition had continued.
Dr Small said it is vital that businesses understand their obligations under the Commerce Act. Businesses should also consider whether a transaction should be flagged with the Commission.
The Commission has played a crucial role in ensuring New Zealand’s markets remain competitive. The case marked the first time the Commission has asked a business that admitted it breached s47 of the Commerce Act to divest.
“While divestment was unsuccessful in this case, this shows the array of enforcement actions available to us.”
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