The Commerce Commission has raised concerns the proposed merger between fuel retailers NPD and Gull could reduce competition, warning it is “not currently satisfied” the deal would not substantially lessen competition in New Zealand.
The concerns are outlined in a Statement of Issues released following an application from Astra Energy Group Limited to acquire both businesses.
The Commission says the document sets out potential competition issues identified during its initial investigation, but does not represent a final decision.
The regulator says it is continuing to investigate the competitive effects of the proposed merger across retail and wholesale fuel markets.
The Commission says its concerns centre on several key areas, including the potential loss of competition in local fuel markets.
It says there are “a number of local markets requiring further investigation in which the parties appear to compete closely and where we are not yet satisfied that there would remain sufficient competitive alternatives post-merger”.
The regulator says the merger could also remove future competition between the two companies as they expand into overlapping areas.
“To the extent that the proposed merger removes such a future dynamic competitive constraint between the Parties, it may prevent a more competitive outcome from arising than in the counterfactual,” the Commission says.
The Commission says it is also considering national-level competition, noting the companies compete through brand strategies such as pricing and discounting.
“With the proposed merger, the competitive constraint that the parties would provide on each other (and particularly the constraint that NPD would provide on Gull) would be lost,” it says.
The regulator is also assessing whether the deal could make coordinated behaviour between fuel companies more likely.
“We are not currently satisfied that the proposed merger would not substantially lessen competition due to coordinated effects,” the Commission says.
It says the merger could remove a disruptive competitor and increase the likelihood of prices being sustained at higher levels.
The Commission is also examining potential impacts in the wholesale fuel market, particularly supply from Gull’s Mount Maunganui terminal.
“We are also not currently satisfied that the proposed merger would not substantially lessen competition due to vertical effects,” it says.
However, the regulator says it does not currently consider the merger would lessen competition in the supply of fuel to commercial customers.
The Commission has extended its decision deadline from March 16 to May 28, with submissions due by April 2 and cross-submissions by April 15.
It says it will only grant clearance if it is satisfied the merger is unlikely to substantially lessen competition in a New Zealand market.
