Commission to review internal merger clearance process

The Commerce Commission has signalled that it intends to review the processes it follows when dealing with merger clearance applications. In this article Bell Gully senior associate David Blacktop explains why Bell Gully sees this as a positive move with the potential to provide greater certainty, and demystify the clearance process, for businesses. However, commission resource constraints and the complexity of the issues raised will continue to determine how soon a decision is reached in any particular case.

The Commerce Act provides a pre-acquisition clearance regime under which potential acquirers can apply to the Commerce Commission for approval to make an acquisition. To grant approval, the commission must be satisfied the acquisition would not substantially lessen competition. The Act requires the commission to make a decision within 10 working days of receiving an application, although there is broad agreement that this timeframe is unrealistic.

The more usual time frame is in excess of 40 working days with latest indications from the commission being that it aims for a 45 working day turnaround. Why do firms allow the commission to take so long when the Act requires a 10 day turnaround? The Act provides that if the commission is not satisfied there is no issue (e.g. because it does not have sufficient time to reach a considered view), it must decline the application. Facing a request for an extension, this gives the applicant a clayton's choice.

As part of the proposed amendments to the Commerce Act the commission has suggested the statutory timeframe be extended to 40 working days. However, notwithstanding this extension, there is no guarantee that a decision will be reached in this time period - commission resource constraints and the complexity of the issues raised will continue to determine how soon a decision is reached in any particular case.

Following a review of its processes the commission has indicated it intends to introduce Process Guidelines aimed at providing more clarity for applicants. The commission intends to release these for consultation later this year, prior to finalisation. To date the advice received by the commission is that the process should include:

• Providing applicants with a draft timeline for the investigation at an early stage.

We support this because it would (a) increase transparency, and (b) provide a visible benchmark against which progress could be measured.

• Issuing a key issues statement about the middle of the investigation (days 20-25).

This could set out issues on which the commission is satisfied and issues which require further analysis. This is similar to the ACCC's statement of issues, although might not be as comprehensive. We support this move because it would assist applicants and their advisers to focus their efforts on addressing the key issues. While as a matter of practice, the key issues often becomes clear as an investigation progresses, it is often difficult to say with certainty that a particular issue is "off the table".

• Updating the applicant on timing after the key issues statement has been issued and considering further information on key issues.

• Having considered the key issues, the commission might grant approval. However, where it is minded to decline approval it will then issue a Letter of Concern and allow the applicant to make further submissions. The commission already adopts this process.

While the detailed draft process guidelines need to be considered carefully when they are published, we consider this is a very positive step which has the potential to demystify the application process for applicants. Clear communication of timeframes is, we think, critical to providing business with the necessary certainty while balancing the need for the commission to undertake the investigations necessary to perform its functions.

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