NEW ZEALAND

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Content last updated: 17-11-2020

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  • Merger Control Regime
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2. Nature of merger control regime

2.1 Mandatory or voluntary

2.1.1 Is filing mandatory or voluntary?

Voluntary.

2.2 Suspensory effect

2.2.1 Must completion of the transaction await clearance by the relevant authorities?

No, since New Zealand has a voluntary filing scheme, completion of a transaction does not have to await clearance.

However, transactions that are closed prior to clearance are risking the transaction being investigated and potentially unwound. Pecuniary penalties may also apply.

1. What type of transactions are caught by the merger control regime?

1.1 Concentrations

1.1.1 Type of transactions that are caught by the merger control rules?

Any acquisition of assets or shares which would have the effect of substantially lessening the competition in a New Zealand market is caught by the merger rules.

The transaction is considered on a group level and parent companies and subsidiaries and other interconnected and associated companies should be considered as if they were one corporate body.

A legal entity is an associated party if the shareholder has a substantial degree of influence on an undertaking, which may be the case if, for instance, a shareholder has a 10% shareholding of the undertaking and the undertaking has a mix of smaller shareholders.

“Assets” include tangible as well as intangible assets.

“Shares” include beneficial interests in, or power to acquire or dispose of, a share, irrespective of voting rights.

1.2 Joint ventures

1.2.1 What types of joint ventures are caught by the merger control rules?

There are no separate provisions regulating joint ventures. However, only joint ventures which involve the acquisition of business assets or shares will qualify for merger control review as specified in Section 1.1.1 above.

Joint ventures on a purely contractual basis may be assessed by the New Zealand Commerce Commission by application of the rules of the Commerce Act on generally restrictive trade practices.

1.3 Definition of "control"

1.3.1 How are the concepts of "control" and "change of control" defined?

Not applicable. It is not a requirement for a transaction to be notifiable that there be a change of control.

1.4 Minority shareholdings

1.4.1 Are minority and other interests less than control caught by the merger control rules?

Yes. It is not a requirement for a transaction to be notifiable that there be a change of control. Any acquisition of assets or shares which would have the effect of substantially lessening the competition in a New Zealand market is caught by the merger rules. Please see Section 1.1.1 above.

2. Establishing jurisdiction for notification of mergers

2.2 Date for establishing jurisdiction

2.2.1 Which date is relevant for concluding whether the transaction is notifiable?

If the undertakings concerned choose to notify the transaction, the notification must be filed before an unconditional agreement has been concluded. The agreement must be conditional on obtaining clearance from the New Zealand Commerce Commission (either expressly or as part of a global condition).

The New Zealand Commerce Commission has consistently held that it does not have power to grant clearance for a merger that is not conditional upon receiving clearance.

2.3 General thresholds

2.3.1 Threshold(s) for when a concentration must be notified under the general merger control regime?

There are no jurisdictional thresholds in New Zealand and no obligation to notify a concentration. The competition act prohibits transactions that would have the effect of substantially lessening competition in a New Zealand market.

The New Zealand Commerce Commission (NZCC) does not have power to determine that the act has been violated and cannot impose penalties. If the NZCC considers that the concentration violates the competition act, it must refer the case to prosecution before the courts.

The undertakings concerned may seek clearance from the NZCC under the voluntary pre-notification regime. The NZCC recommends that the undertakings concerned apply for a pre-merger clearance if the concentration exceeds the below thresholds. A transaction is unlikely to raise competition concerns if it falls within the below thresholds:

  • the undertakings concerned have a combined market share of less than 40%, and the three businesses in the market with the largest market shares have a combined market share of less than 70%; or
  • where the three businesses in the market with the largest market shares have a combined market share of 70% or more, the undertakings concerned have a combined market share of less than 20%.

Whilst the NZCC recommends applying for clearance if the transaction exceeds the thresholds, in practice, the majority of transactions granted clearance exceed the thresholds.

2.3.2 For each threshold, can the threshold be triggered by only one undertaking having local turnover?

Not applicable.

2.3.3 For each threshold, can the threshold be triggered without any undertaking having local turnover?

Not applicable.

2.3.4 Are there any circumstances where transactions falling below these thresholds may be still investigated?

As the “thresholds” are only indicators, the New Zealand Commerce Commission may investigate any acquisition of assets or shares which would have the effect of substantially lessening the competition in New Zealand.

2.4 Other national thresholds for ex ante merger control (e.g. sector-specific rules)

2.4.1 Relevant thresholds for sector-specific or other ex ante merger control rules?

Specific rules apply in the farming and fishing industries.

2.5 Foreign-to-foreign mergers

2.5.1 Do any exemptions, special thresholds etc. apply to foreign-to-foreign mergers, i.e. where none of the undertakings concerned is domiciled in the jurisdiction?

Specific rules apply to foreign acquisitions of “significant business assets”.

“Signification business assets” is defined as either of the total expenditure involved, price paid or gross value of the assets of the target exceeds NZD 100,000,000.

A foreigner is defined as an “overseas person” who

  • is not a citizen of, or ordinarily a resident of, New Zealand;
  • is a partnership, corporate body of trust with 25% or more ownership or control held by an overseas person by reference to certain factors (e.g. composition of management or beneficial ownership), or
  • a company incorporated outside New Zealand, or a company in which a person holds 25% or more of the shares or voting rights (directly or indirectly), or power to control 25% or more of management.

Foreign acquisition is also caught by the merger regime rules if the overseas person has acquired a controlling interest in a New Zealand corporation through acquisition outside New Zealand of the assets or shares of that corporation.

A “controlling interest” regarding foreign acquisition is defined as the overseas person:

  • controlling the management;
  • holding more than 20% of the votes, shares or right to receive dividend;
  • being the holding company, or
  • holding assets of the New Zealand corporation which gives them effective control over the corporation.

3. Calculation and allocation of turnover, asset value, transaction value etc.

3.3 Relevant undertakings for the calculation of turnover

3.3.1 The undertakings whose turnover is taken into account?

The transaction is considered on a group level and parent companies and subsidiaries and other interconnected and associated companies should be considered as if they were one corporate body.

3.3.2 Shall the turnover of the existing seller be included in the target's group turnover?

Not applicable.

3.6 Calculation of other thresholds

3.6.1 The principles for calculation of metrics for other thresholds (e.g. transaction value, market share, share of supply etc.)?

The transaction is considered on a group level and parent companies and subsidiaries and other interconnected and associated companies should be considered as if they were one corporate body.

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