A freight company and an associated business have been ordered to pay $420,000 in penalties after their acquisition of rival suppliers substantially lessened competition in a Waikato market.
The High Court ordered Alderson Logistics Limited and associated company Supa Shavings (2022) Limited to pay the penalty following action by the Commerce Commission.
In May 2022 the companies acquired the assets of ABS Carriers Limited and Supa Shavings Limited, which supplied bulk wood shavings used as bedding for chicken and goat farmers in the Waikato region.
Before the acquisition, ABS Carriers and Supa Shavings were the largest suppliers of bulk wood shavings in the region with a combined market share of at least 70–80%.
Commerce Commission chair John Small says the case highlights the risks for businesses undertaking acquisitions that substantially lessen competition.
“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,” Small says.
“The companies were each other’s closest competitors and, when those assets were acquired, that competition was eliminated.”
Small says the commission had not been notified about the transaction.
“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 they gained commercially from the acquisitions for about 13 months before a shavings supply shock in June 2023 affected their profitability.
The companies also accepted that until around November 2024 other suppliers in the same markets supplied on an ad hoc basis, had small market share and did not constrain Alderson and Supa Shavings (2022) “including from increasing prices above competitive levels”.
Justice Gardiner noted the companies could not rely on their lack of profitability to establish they had not gained from the acquisitions without analysing what their profit would have been had the acquisitions not occurred and competition continued.
Small says it is important businesses understand their obligations under the Commerce Act.
“Businesses should also give due consideration to whether a transaction ought to be flagged with the Commission,” he says.
“Ultimately, we perform this critical function to the benefit of all Kiwi consumers and businesses.”
The case is the first time the Commission has asked a business that admitted it breached Section 47 of the Commerce Act to divest.
“While divestment was unsuccessful in this case, this shows the array of enforcement actions available to us,” Small says.
