Cavalier scouring merger would extract 'monopoly rents' 5 Oct 2015
Related articles
- NZ consumers grow more upbeat, may resume spending Business
- Knowles quits as CEO of KiwiBank Business
- NZ migration bolstered by British invasion Migration
- NZ manufacturing activity reaches highest since 04 Business
- NZ dollar hits 22-month high vs euro Business
- OceanaGold finds new gold deposits at Fraser mine Business
- Transpower gets go-ahead for $170m SI upgrade Business
- Government Widens Drought Assistance News
- NZ home sales creep up in March, still subdued Property
- NZ economy expands at fastest pace in two years Business
Cavalier group would extract 'monopoly rents' if scouring merger allowed, Godfrey Hirst says
By Jonathan Underhill
Oct. 5 (BusinessDesk) - A merger of Cavalier Wool Holdings and New Zealand Wool Services International's two wool scouring operations would create a monopoly that would use its market powers to hike prices as much as 25 percent, says carpet maker Godfrey Hirst.
The Commerce Commission on Friday released its second draft determination on the merger, maintaining its view that the public benefits would outweigh the loss of competition.
The regulator considered the biggest constraint on prices from a merged business could be scours in Asia, especially China, and cited the experience of Australia, where scouring plants dropped to three in 2009 from 25 in 1995, while volume plunged to 54,000 tonnes of greasy wool, or 14 percent of total production, from 600,000 tonnes, or 82 percent, in 1995.
"The commission also recognises that the Chinese scouring industry poses a significant long-term competitive threat to the domestic industry in New Zealand," it says in its draft report.
But Godfrey Hirst, which competes with Cavalier Wool Holdings group member Cavalier Corp and extended its dominance of the Australasian carpet market with the acquisition of the Feltex assets, said it was "stunned" at the way the regulator appeared willing to allow a monopoly to be created in the local market. Price hikes would ultimately be passed on to wool growers, it said.
The commission "admits that the CWH takeover would substantially lessen competition in the wool scouring markets and in the domestic customer wool grease market; would give CWH a monopoly on the supply of wool scouring services and the supply of wool grease post-acquisition; and entails potential price rises," Godfrey Hirst said in a statement. "Despite this, the commission has concluded that the so-called public benefits of the takeover, which include staff cuts and the sale of core industry assets, outweigh the likely negative impacts of higher prices and lower quality production."
The commission wasn't convinced by Cavalier's argument that barriers to enter into the New Zealand scouring market were relatively low, meaning a new competitor could easily appear.
Cavalier Wool Holdings is New Zealand's largest wool scouring business and the deal will see Cavalier Corp shrink its ownership from 50 percent to 27.5 percent in the scouring business.
The merged scouring business will be 55 percent owned by Cavalier, private equity firm Direct Capital and the government's Accident Compensation Corp, with WSI parent Lempriere taking a 45 percent stake. After the merger, pending final regulatory approval, WSI would separate out its scouring business to become a stand-alone wool exporter as a commission customer of Cavalier Wool Holdings.
Submissions on the latest draft determination are due on Oct. 15 with a final determination by the commission slated for Nov. 13.
(BusinessDesk)
News
Hilary Timmins' Award-Winning UK Documentary Series To Inspire NZ Students
29 Jun 2020 Education
Dream Catchers, produced and directed by Hilary Timmins, celebrates the success stories of more than thirty inspirational New... more
New Zealand reaffirms support for Flight MH17 judicial process
7 Mar 2020 News
Ahead of the start of the criminal trial in the Netherlands on 9 March, Foreign Minister Winston Peters has reaffirmed the need to... more
Business
NZ Government's Economic package to fight COVID-19
17 Mar 2020 Business News
The Coalition Government has launched the most significant peace-time economic plan in modern New Zealand history to cushion the... more
NZ Government announces aviation relief package
19 Mar 2020 Business News
Transport Minister Phil Twyford today outlined the first tranche of the $600 million aviation sector relief package announced earlier... more
Living
Diversity was Key at New Zealand Trade Tasting in London
6 Jun 2022 Food & Wine
New Zealand Winegrowers Annual Trade Tasting was recently held in London, on Wednesday 4 May, in Lindley Hall.
It was the first... more
Kiwi author stuns Behind the Butterfly Gate
12 Jan 2022 Arts
Hidden behind the Butterfly Gate is where the secret has been kept for 76 years...
New Zealand writer Merryn Corcoran’s... more
Property
Fairer rules for tenants and landlords
17 Nov 2019 Property
17 NOVEMBER 2019
The Government has delivered on its promise to the over one million New Zealanders who now rent to make it fairer... more
New Zealand Government will not implement a Capital Gains Tax
17 Apr 2019 Property
The Coalition Government will not proceed with the Tax Working Group’s recommendation for a capital gains tax, Jacinda Ardern... more
Migration
Boosting border security with electronic travel authority – now over 500,000 issued
19 Nov 2019 Migration
19 NOVEMBER 2019
We’ve improved border security with the NZeTA, New Zealand Electronic Travel Authority, which helps us to... more
Christchurch reinstated as refugee settlement location
18 Aug 2018 Migration
18 AUGUST 2018
HON IAIN LEES-GALLOWAY
The announcement that Christchurch can once again be a settlement location for refugees... more
Travel
Gallipoli Anzac Day services cancelled
19 Mar 2020 Travel & Tourism
The New Zealand and Australian Governments have announced this year’s joint Anzac Day services at Gallipoli will be cancelled... more
New Zealanders advised not to travel overseas
19 Mar 2020 Travel & Tourism
New Zealanders advised not to travel overseas
more
Sport
The Skipper's Diary: Sir Richard Hadlee honouring his father and NZ's Forty-Niners
27 Oct 2019 Cricket
NZNewsUK London Editor Charlotte Everett spoke to Sir Richard Hadlee about why he’s chosen to publish his father’s... more
PREVIEW: All Blacks v England semi-final
26 Oct 2019 Rugby
The two most convincing quarterfinals winners are set to square off in a semifinal showdown for the ages when the All Blacks meet old... more
Columns
Gordon Campbell on the Gareth Morgan crusade
11 Nov 2016 Opinion
Gordon Campbell on the Gareth Morgan crusade
First published on Werewolf
The ghastly likes of Marine Le Pen in France and Geert ... more
Gordon Campbell on the US election outcome
10 Nov 2016 Opinion
Column - Gordon Campbell
Gordon Campbell on the US election outcome
Well um.. on the bright side, there (probably)... more
Kiwi Success
Congratulations to Loder Cup winner
26 Sep 2018 People
25 SEPTEMBER 2018
The Loder Cup, one of New Zealand’s oldest conservation awards, has been awarded to Robert McGowan for 2018... more
Appointments to New Zealand National Commission for UNESCO
16 Aug 2018 Appointments
16 AUGUST 2018Appointments to New Zealand National Commission for UNESCO
HON JENNY SALESA
Associate Education Minister Jenny Salesa is... more
Recruitment
Historic pay equity settlement for education support workers
14 Aug 2018 Recruitment
14 AUGUST 2018Historic pay equity settlement for education support workers
RT HON JACINDA ARDERN
HON CHRIS HIPKINS
Prime Minister
The... more
Historic pay equity settlement for education support workers
22 Aug 2018 Recruitment
14 AUGUST 2018Historic pay equity settlement for education support workers
RT HON JACINDA ARDERN
HON CHRIS HIPKINS
Prime Minister
The... more