Media Release
Issued 2 October 2006/048
NZBL to pay $1.1 million for Mana Coach share acquisition
New Zealand Bus Limited has been fined $500,000 and been ordered to pay around $600,000 in costs to the Commerce
Commission after it breached section 47 of the Commerce Act when it acquired shares in Mana Coach Services.
The vendors of the shares, Ian Waddell and Kerry Waddell, have also been found guilty of being accessories to the
transaction. No financial penalty was imposed on the vendors.
Section 47 of the Commerce Act prohibits acquisitions that are likely to substantially lessen competition. The Commerce
Commission administers a voluntary regime that allows companies to apply for clearance if they consider their planned
acquisition could raise competition issues.
Commerce Commission General Manager Geoff Thorn said the significant penalty imposed on NZBL showed that the voluntary
clearance regime was robust.
“The stakes are high for companies planning acquisitions and mergers,” Mr Thorn said.
“In commercial transactions, parties are likely to carefully weigh up the risks and benefits and
there must be a credible threat that penalties for prohibited mergers will be imposed.
“The Court has found that both the purchaser and vendors breached the Act by attempting to go ahead with a merger that
was likely to substantially lessen competition,” Mr Thorn said.
Under the voluntary merger clearance regime, companies can apply to the Commission for a clearance to merge which gives
them reassurance the merger is legal. NZBL applied for such a clearance, but withdrew the application before it was
approved and went ahead with the acquisition.
“By penalising NZBL for an acquisition that was likely to lessen compettition, today’s finding reinforces the integrity
of the voluntary clearance regime,” said Mr Thorn.
“It reminds businesses that they must pay due attention to competition issues when planning mergers or acquisitions.”
In January 2006 NZBL applied for clearance to purchase the 74% share of Mana Coach that it did not already own. In March
it withdrew the application and planned to proceed with the acquisition without clearance. The acquisition was stopped
when a High Court injunction was granted to the Commission in June.
In the Wellington High Court, Justice Miller ruled that NZBL’s attempt to purchase the shares breached section 47 of the
Commerce Act because it was likely the acquisition would have resulted in a substantial lessening of competition in the
Wellington bus services market.
Justice Miller found that NZBL had breached the Commerce Act on 15 March when its offer to buy the shares became
unconditional. He found that Ian Waddell and Kerry Waddell, the vendors of the Mana shares, had also breached the Act at
that time by being parties to the prohibited acquisition.
Background
New Zealand Bus Limited is a wholly owned subsidiary of Infratil Limited. It is the 100% holding company for Wellington
City Transport Limited, Cityline (NZ) Limited and Transportation Auckland Corporation Limited, which operate the New
Zealand bus businesses known as Stagecoach Wellington, Cityline Hutt Valley and Stagecoach Auckland.
Mana Coach Services is a family owned and managed business that operates Mana Coach Services and Newlands Buses. Mana
Coach Services operates commuter and passenger bus services within north Wellington, Porirua and the Kapiti coast, as
well as a service to the Paraparaumu rail line for Wellington city connections, and coach charter business.
Commerce Act. Under section 47 of the Commerce Act, a person must not acquire assets of a business or shares if the
acquisition would have, or would be likely to have, the effect of substantially lessening competition in a market.
NZBL’s application. When planning acquisitions that could affect competition in a market, companies can apply to the
Commerce Commission for clearance. NZBL made such an application in January, but withdrew it in March, after the
Commission raised concerns about the proposal. The Commission then applied to the Court to stop the acquisition from
occurring while the case was considered by the High Court.
Infratil. The decision establishes that a parent company that directs an acquisition by a subsidiary will breach the
Commerce Act if it has sufficient knowledge of the competitive environment in which the proposed acquisition is taking
place, and of the implications of the transaction. In this case, the Court considered that because Infratil had only
recently acquired NZBL and become involved in the Wellington bus market, it did not have the necessary level of
knowledge. The Court therefore held that Infratil was not liable as an accessory.
ENDS