Commission Clears Southern Cross' Third Application For Clearance To Acquire Aetna Health, Subject To Divestment
The Commerce Commission today cleared The Southern Cross Medical Care Society’s third application for clearance to
acquire Aetna Health (NZ) Limited, subject to Southern Cross divesting all of the medical insurance policies of insured
members of Aetna.
In its application, Southern Cross stated that its broad reasons for the proposal were to acquire Aetna’s information
technology system and then use it to upgrade its own system, and to acquire Aetna’s health management business so that
it could expand its own business lines.
Both Southern Cross and Aetna are also involved in providing medical insurance, and are currently the two largest
providers of this insurance in New Zealand.
The Commission had declined Southern Cross’ first application in August. That application did not include a divestment
In its first decision the Commission had stated that a merged Southern Cross and Aetna would have had a very high
combined market share. The Commission was not satisfied that the merged entity would face effective constraint from
existing or potential competitors in the event that it attempted to significantly raise prices, or reduce benefits or
services. Moreover, the proposed acquisition would have had the effect of removing Southern Cross’ principal competitor.
Southern Cross then made a second application including an undertaking that, if the proposed acquisition went ahead, it
would divest a number of medical insurance policies of insured members of Aetna.
In its second decision, the Commission concluded that it was not satisfied that a divestment undertaking of the kind
offered would answer the Commission’s concerns about dominance.
Southern Cross then made a third application including the undertaking to divest all of the medical insurance policies
of insured members of Aetna. It undertook to keep the Aetna medical insurance business separate from Southern Cross
during the sale process. The undertakings also provide that Southern Cross will not have access to confidential and
commercially sensitive informaton about Aetna policy holders.
Commission Chair John Belgrave said that, subject to the divestment and associated undertakings, the Commission is
satisfied that the proposal would not result in Southern Cross acquiring or strengthening a dominant position in the
medical insurance market.
Public copies of the Commission’s decision, including the divestment undertaking, will soon be available from the
Commission’s website, www.comcom.govt.nz, and are available from reception at its Wellington office, level 7 Landcorp
House, 101 Lambton Quay.
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any market.
Parties can apply for a clearance, which the Commission will grant if it is satisfied that dominance is not acquired or
strengthened. A clearance, if granted, protects an acquisition from legal action under the Act.
Media contact: Commerce Act Manager Geoff Thorn
Phone work (04) 498 0958, cellphone 021 661 104
Senior Advisor Communications Vincent Cholewa
Phone work (04) 498 0920, home (04) 473 3827