29 November 2018
Release No. 81
Commission proposes to authorise Tenex’s acquisition of San-i-Pak
The Commerce Commission has today released a draft determination proposing to grant authorisation to Tenex to acquire
the assets of competing Canterbury-based waste firm San-i-Pak.
Tenex, through its subsidiary International Waste Limited (IWL), and San-i-pak are the sole providers of medical and
quarantine waste treatment and disposal services in the South Island. The acquisition would result in IWL being the only
provider of these services subject to another waste management firm entering the market in the future.
Chairman Dr Mark Berry said while the acquisition would substantially reduce competition, the Commission’s preliminary
view was that it was likely to produce such a benefit to the New Zealand public that it should be authorised.
“The removal of San-i-Pak as a competitor is likely to result in IWL raising its prices for its quarantine and medical
waste disposal services in Canterbury. IWL would own the only plant capable of disposing this particular waste and we
expect any other waste management firm is only likely to enter the market if it can win a large contract,” Dr Berry
said.
“However, while we expect competition would lessen with the acquisition, our preliminary view is the cost savings
associated with the consolidation of the two firms would outweigh the likely negative consequences. We estimate that the
acquisition could produce a net benefit of up to $1.3 million in net present value terms over ten years. As a nationwide
firm, Tennex, will face some constraints when it negotiates national contracts and other firms are likely to submit bids
when large customer contracts are up for tender in Christchurch.”
A copy of the Draft Determination is available on the Commission’s website.
Interested parties are invited to submit their views on the Draft Determination are due by 12 December 2018.
Background
The Commission has previously considered this acquisition in a clearance context. On 29 February 2016, we declined to
give clearance to Tennex to acquire the medical and quarantine waste collection and treatment assets of San-i-pak as it
considered the acquisition would likely result in a significant lessening of competition.
Tenex subsequently applied for authorisation for this acquisition on 17 September 2018. Authorisation applications
follow a two-step process under the Commerce Act. We must first assess whether the merger would be likely to
substantially lessen competition in a market. We assess whether a merger is likely to substantially lessen competition
in a market by comparing the likely state of competition if the merger proceeds, with the likely state of competition if
it does not. If we are satisfied that the merger is not likely to substantially lessen competition, then we would clear
the merger at the first step.
If we cannot give clearance due to competition concerns, the second step is to determine whether the merger should be
authorised applying the public benefit test. The public benefit test involves a balancing of the public benefits and
detriments that would, or would be likely to, result from the merger. We must authorise a merger if we are satisfied
that the merger will result in such a benefit to the public that it should be permitted.
The Commission’s view on the clearance step in the Tenex acquisition has not changed since the first application in
2016. It has now been asked to undertake the public benefit assessment under the authorisation process and on this test
its preliminary view is to grant approval for the merger.
ends