Draft determination on wool scouring assets application issued

13 Apr '11

2 min read

The Commerce Commission has reached a preliminary view that it should allow Cavalier Wool Holdings to acquire up to 100 per cent of New Zealand Wool Services International's wool scouring assets and stock (and/or the shares in New Zealand Wool Services International).

The Commission has published its draft determination on Cavalier Wool Holding's application under the Commerce Act for authorisation of the proposed acquisition.

“Our preliminary view is that the proposed acquisition would substantially lessen competition in the North and South Island wool scouring markets. Cavalier Wool Holdings would essentially have a monopoly on the supply of wool scouring services post acquisition. However, at this preliminary stage, the Commission expects that there would be benefits to the public that would outweigh the loss of competition,” said Commerce Commission Chair Dr Mark Berry.

“The Commission considers there is the potential for Cavalier Wool Holdings to raise prices after the acquisition because of the loss of the constraining influence of NZ Wool Services International. However, we expect that the level of the detriment resulting from the acquisition is likely to be limited by the ongoing, long-term competitive threat of the Chinese wool scouring industry and the potential for new entry into the New Zealand wool scouring industry,” said Dr Berry.

“On the other hand, the Commission considers that there would be considerable benefits to the public arising from the rationalisation of the wool scouring industry that Cavalier Wool proposes to carry out. The rationalisation is likely to lead to lower production and administration costs, the freeing up of industrial sites, and lower ongoing capital expenditure requirements in the future.”

The Commission is seeking submissions on its Draft Determination by 27 April 2011. Submissions will be posted on the Commission's website. The Commission will hold a conference with interested parties on 4 and 5 May, and the final determination will be issued by 31 May 2011.

Commerce Commission