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Analysis of retail mergers getting narrower still?

14 April 2008

The New Zealand Commerce Commission's recent decision on Whitcoulls' application for clearance to acquire Borders bookstores provides some insights into how the Commission might look at other retail sector mergers or acquisitions.

Of particular interest is the Commission's rejection of Whitcoulls' market definition in favour of its own much narrower market. Whitcoulls proposed the following: The retail book market (including mail order and online sales) – either national or localised based on a 7km radius from each Borders store.

The Commerce Commission responded with:The retail of books by bricks-and-mortar retailers in the Auckland CBD, Albany, Wellington CBD and Riccarton shopping precincts.

While clearance was ultimately granted, despite the narrow market definition, some interesting issues were raised which will have resonance for other retail transactions.

Click here to read more about retail mergers

Greenwash marketing – the latest deadly sin

You can tell that an issue is topical when the Vatican adds it to the list of deadly sins. "Polluting the environment" now appears to sit alongside envy and lust.

But if polluting is reviled behaviour, what about falsely claiming that your product is "environmentally friendly"? While the Vatican is unlikely to be concerned, "greenwashing" – making unfounded environmental claims – is causing competition agencies to draw up their own lists of deadly sins.

As consumers pay more attention to the green credentials of products, consumer protection agencies will demand more from businesses seeking to benefit from these consumer preferences. Businesses in this new world will need to tread carefully to reduce their carbon – and risk – profile when using claims about "sustainability" and "recyclability".

Click here to read more about greenwash marketing claims

Fair Trading Act assault on retailer marketing continues

One of the most important phrases in a marketer's lexicon is that a product is "on sale", or its variants "special" or "20 percent off" (ranked only behind the use of the word "free").

The reason is simple: pricing and the notion of a discount or bargain is the most powerful – and sometimes the only – factor in a consumer's purchasing decision.

The Commerce Commission is vigilant and vigorous in its enforcement of the Fair Trading Act in this area. This note examines themes emerging from several recent cases brought by the Commission on behalf of complainants over false and misleading representations about the price of goods and services, especially advertised savings or discounts.

Click here to read more about sales, discounts and the Fair Trading Act cases

Other trade practices news in brief

The Commerce Commission has continued with its high levels of enforcement activity from 2007, and there have been parliamentary developments with proposed changes to the Commerce Act introduced to the House recently:

  • The Commerce Amendment Bill has been introduced to Parliament. The Bill proposes substantial changes to the regulatory regime governing airports, electricity lines businesses and gas pipelines businesses that may face limited competition. The Bill also introduces new offences and significant penalties for companies, directors and senior executives. For example, breach of information disclosure provisions will carry maximum penalties of $500,000 for individuals and $5 million for companies.

  • Other proposals coming out of the 2007 MED Commerce Act Review process, concerning changes to the merger clearance and authorisation procedures, have been delayed at present, pending further research and consultation on certain points before release of a final view on revised procedures. One item relating to enforceability of divestment undertakings has made its way into the Commerce Amendment Bill, noted above.

  • A fine of $1.9 million was imposed upon Nufarm group companies, taking total penalties in New Zealand's largest price-fixing and market-sharing cartel case (involving wood preservatives chemical products) to over $7.5 million. This latest round in the High Court follows on from $1.8 million fines against Osmose and the record $3.6 million fine obtained against Koppers Arch Wood in 2006. The Commission continues to target collusive cartel behaviour as its highest priority enforcement mission.

  • Meanwhile, in Australia the introduction of criminal jail sentences for corporate executives found guilty of cartel behaviour came a step closer with the introduction into the federal parliament of the Trade Practices Amendment Act. Once passed into law, New Zealand firms (and their executive officers) who do business in Australia will have to be even more vigilant in any dealings with competitor companies, and it will only be a matter of time before we see calls made for New Zealand law to follow suit. In the meantime, extradition orders could possibly be used to ensure individuals face trial in Australia.

And finally...

Those readers still happily munching on leftover chocolate Easter eggs might raise an eyebrow at news that antitrust investigations have been commenced in overseas jurisdictions into chocolate and candy manufacturers.

Possible price-fixing issues are being looked at in North America and Europe, reportedly involving a number of large household-name confectionery companies. Although we hasten to add there appears no suggestion of such behaviour in New Zealand markets, the thought is enough to make one almost choke on a chocolate…