Investigation and explanation
27 Jul 2017
The Commerce Commission is investigating the competition issues raised by Vero buying 19.99% of Tower’s shares; and provides an explanation of it's decision on the Vero takeover of Tower.
Section 47 investigation of share purchase
A document released to interest.co.nz under the Official Information Act (OIA) reveals the Commission is concerned competition in the general insurance market may be reduced by Vero in February and March buying nearly a fifth of the NZX and ASX-listed company’s shares.
It is therefore investigating this acquisition alongside it considering Vero’s application to get clearance to buy 100% of Tower’s shares.
While Vero made its clearance application voluntarily on March 2, the Commission began a separate investigation on its own accord.
While the former process is public, the latter isn’t.
However the latter is mentioned in the ‘Letter of Issues’ the Commission sent Vero on May 5, outlining the Commission’s concerns with the insurer’s merger application and giving it the opportunity to provide feedback on these.
Interest.co.nz has just received a redacted copy of this letter under the OIA. It says: “We consider that Vero’s completed acquisition of 19.99% of the shares in Tower could raise issues under section 47 of the Commerce Act 1986.
“The Commission has opened a separate section 47 investigation into this acquisition, which we are undertaking concurrently with our consideration of Vero’s application for clearance.”
Section 47 of Commerce Act says: “A person must not acquire assets of a business or shares if the acquisition would have, or would be likely to have, the effect of substantially lessening competition in a market.”
ComCom explains its Vero/Tower decision
The Commerce Commission said yes to IAG, but no to Vero - Jenée Tibshraney of interest.co.nz asked its chairman why.
How was the Commerce Commission’s thinking around Vero’s application different to its thinking around IAG’s?
Berry: “Our analytical framework is the same. It’s just we’re looking at a different factual matrix here…
“At the time we looked at the Lumley acquisition that was essentially a ‘four to three’ in the market. There were four significant players if you were to count Lumley. And so when we gave approval to that, we were satisfied that with the remaining three (IAG, Vero and Tower) left in the market, the state of competition wouldn’t be materially affected…
“This case is one where we are essentially looking at three significant players reducing to two… and that’s getting to a level of concentration that was particularly of concern to us…
For the full interview go to interest.co.nz - article