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This brief counsel, the first in our series on the Commerce (Promoting Competition and Other Matters) Amendment Bill (the Bill), discusses amendments to the merger control regime. Some changes are sensible, while others may introduce uncertainty and increase costs.
The closing date for submissions on the Bill is Wednesday 4 February 2026.
Changes to the SLC test
We support retaining the current substantial lessening of competition (SLC) test, without the amendments proposed in the Bill.
The amendment aimed at “killer” acquisitions makes explicit that the SLC test includes “creating, strengthening, or entrenching a substantial degree of power in the market”. Killer acquisitions are described as “incumbents acquiring emerging or potential competitors before they can grow into effective rivals”. It is unclear what types of acquisition this change is intended to capture, specifically, which acquisitions by “incumbents” would not substantially lessen competition but would still enhance or preserve market power. The change:
- does not obviously alter the existing legal test. Case law and the Merger Guidelines already confirm that a substantial lessening of competition includes the enhancement or preservation of market power (relative to the counterfactual). However, the intent is clearly to widen the net, and
- essentially reintroduces the pre-2001 test of “creating or strengthening a dominant position”,1 which was removed in part because it was considered too narrow.
This change leaves significant uncertainty as to the consequence for the legal test and scenarios in which notification is expected. If implemented, Commission guidance will be an important first step towards clarity. Further, the change redefines “substantially lessening competition” wherever those words appear in the Commerce Act. So this change also applies to anticompetitive arrangements generally as well as unilateral abuses of market power. It is not clear why this broader application is necessary, given the change is apparently focused on mergers.
The amendment aimed at “creeping” acquisitions explicitly empowers the Commission to assess patterns of small acquisitions by a business over a three-year period. The amendment will come into force six months after Royal assent. It will apply to clearance and authorisation applications from that date, with the relevant period starting three years before the application’s registration. The Commission will have the power to review acquisitions that took place prior to the amendment coming into force.
While it is important for the Commission to effectively enforce against serial acquisitions that lessen competition, we do not believe amending the SLC test to allow the Commission to assess the cumulative effect of completed transactions is the right solution. And we think there are significant risks of unintended consequences.
The focus should remain on the lawfulness of the marginal transaction, rather than allowing the Commission to retrospectively impugn earlier transactions that would otherwise be lawful if considered in isolation. Allowing the Commission to treat a sequence of separate transactions as a single transaction and find them all unlawful on the basis of their combined effect could also undermine investor confidence.
When it examines the marginal transaction, the Commission can already assess the impact of prior transactions, whether undertaken by the acquirer or other parties that have affected the market structure. That is no more than to say that the Commission examines the effect of the marginal transaction in light of the existing market structure, which includes the impact of transactions that have already occurred. That also includes understanding the impact of transactions that have occurred more than three years prior.
The Commission already enforces against serial acquisitions, as demonstrated by successful action against Wilson Parking in local parking markets. We see no evidence that the Commission is unable to intervene in serial acquisitions.
In our view, there are other mechanisms that are worth exploring to clarify the Commission’s approach to serial acquisitions within the current SLC test:
- The Government can issue a policy statement under s 26 of the Act directing the Commission to have regard to the competition effects of serial acquisitions, if it is concerned that this is not currently a sufficient focus of the Commission. The Minister’s annual Letter of Expectations is another vehicle for communicating policy concerns.
- The Commission’s Merger Guidelines do not currently set out its analytical framework for serial acquisitions. Further development of these Guidelines could provide more certainty. Some of the complexities associated with scrutinising serial acquisitions have more to do with process rather than the substance of the test. For example, the Guidelines could explain how the Commission proposes to engage with an acquirer that is undertaking several small transactions simultaneously, where defining the ‘marginal’ transaction or assessing the order of competition impacts is challenging.
Substantial degree of influence
The Bill introduces five factors that “may, without limitation, be relevant” in determining whether a person has a substantial degree of influence:
- shareholding or voting rights that provide the ability to influence key decisions of the other person,
- the right to appoint or remove directors or key executives of the other person,
- veto powers over strategic decisions of the other person,
- financial arrangements that create economic dependency on the part of the other person, and,
- contractual agreements, informal arrangements, or historical patterns of deference.
We consider this change unnecessary. The substance of the test is already well understood, and further criteria or clarity on how to assess effective control or a substantial degree of influence are not necessary.
The current approach offers the advantage of maintaining flexibility, as the substantive test can be satisfied by different factors or for varying reasons depending on the circumstances. The Bill’s codification of the factors inevitably erodes the principled nature of the test and its flexibility.
If factors are to be introduced, it is helpful that they adhere closely to those in Commerce Commission v New Zealand Bus Limited2 and are expressed to be “without limitation” so that other factors may be relevant. In other words, while the Bill does not enhance clarity, it is helpful that the approach minimises the extent to which it limits flexibility.
Assets of a business
The Bill replaces “assets of a business” with “assets” in section 47(1), meaning the provision addresses as wide a range of types of acquisition as possible. We do not consider “assets of a business” to be unclear or unduly narrow; in practice it is interpreted expansively. However, we support ensuring section 47 is broad, largely so that as wide a range of transaction types as possible are free to take advantage of the Commission’s clearance process, rather than relying on self-assessment or the clunkier authorisation process.
Voluntary behavioural undertakings
We support the Bill’s amendment allowing the Commission to accept behavioural undertakings to address concerns with a merger or acquisition, including as a condition of clearance or authorisation, or in relation to the enforcement of section 47. The Commission can already accept behavioural undertakings in other parts of the Act, and New Zealand is currently out of step with other jurisdictions that accept such undertakings in the merger context. Further, there is not a clear demarcation between structural and behavioural undertakings, making the current limitation seem arbitrary.
This is a positive change. While it may not affect many cases, behavioural undertakings can allow certain efficiency-enhancing mergers to proceed without detriment to competition, and should therefore be expected to increase the effectiveness of New Zealand’s merger control regime.
Call-in powers to pause and assess mergers
The Bill gives the Commission powers to suspend or require clearance - a significant and potentially draconian extension of its powers. The Commission can already seek to block a transaction by seeking injunctive relief from the Court and the requirement to persuade a Court that intervention is warranted is an important safeguard. Notably, the Commission need only have reasonable grounds to believe suspension is necessary to protect competition while it continues its assessment, it does not need to have reasonable grounds to believe that the transaction is actually unlawful. This new power, coupled with the ability to require parties to seek clearance, essentially does away with New Zealand’s voluntary merger control regime.
We have not seen evidence of issues with non-notified mergers in New Zealand, so we do not believe there is a case for allowing the Commission to call-in transactions. When the Commission investigates a non-notified merger, it already has powers to request information and documents and require the parties to appear and give evidence. These powers put a high degree of pressure on parties to submit a clearance application and are, for all intents and purposes, equivalent to calling in the transaction.
Statutory timeframes
The Bill amends the statutory timeframes, allowing up to 140-160 working days for complex merger cases. It also requires the Commission to publish a decision summary within one day, and full reasons within 20 working days. These changes will likely impact only the more complex clearance processes and those where clearance is declined (as early publication of reasons will allow for more timely applications for appeal).
De minimis threshold
Missing from the Bill is a de minimis threshold, below which notification is unnecessary. In our view, New Zealand’s merger regime should incorporate such a threshold, providing guidance to firms, particularly smaller ones operating in small markets, on when a transaction will not raise competition concerns due to the transaction falling below the minimum threshold for Commission review. This would reduce the compliance burden and help the regime to better reflect the realities of small markets in New Zealand.
- Albeit the Bill refers to substantial market power rather than dominance, the High Court has held that the terms are essentially interchangeable. Commerce Commission v Bay of Plenty Electricity HC WN CIV-2001-485-917 (13 December 2007) at [298]: “in general the question of degree is so slight as to prevent clear enunciation. …We will therefore proceed on the basis that there is no material difference between the two tests…”.
- Commerce Commission v New Zealand Bus Limited, Infratil Limited, and Blairgowrie Investments Limited and ors [2007] NZCA 502.
