Commission Grants Clearance For EROAD To Acquire Coretex

The Commerce Commission has granted clearance to EROAD Limited (EROAD) to acquire all of the shares in Coretex Limited (Coretex).

EROAD and Coretex both provide vehicle telematic solutions to customers in New Zealand, as well as in Australia and the United States. Vehicle telematic solutions allow commercial fleet owners to analyse and manage how their vehicles and drivers are performing, and can assist them in meeting statutory requirements such as the payment of road user charges (RUC).

In our October Statement of Issues, the Commission raised preliminary concerns that the acquisition would substantially lessen competition for the supply of telematic solutions to customers that include an electronic road user charges (eRUC) system. eRUC systems automate the calculation and payment of RUC, and display the RUC licence digitally inside the vehicle.

Commissioner Dr Derek Johnston says the Commission is now satisfied that the proposed acquisition is unlikely to substantially lessen competition in any New Zealand market.

“A key focus for us was whether Coretex could become a stronger competitor absent the proposed acquisition. Evidence that we received since our Statement of Issues, however, showed that this was unlikely,” Dr Johnston said.

“We also found that the merged entity is likely to face competition from rival suppliers of telematic solutions which include eRUC systems and, for some customers, from suppliers of telematic solutions which include ‘electronically assisted’ RUC (eaRUC) systems. eaRUC systems perform many of the same functions as eRUC systems.

“In light of this, we are therefore satisfied that the proposed acquisition would not have a significant detrimental effect on competition when compared with what would likely happen if the merger did not proceed.”

A public version of the written reasons will be available on the Commission’s case register in due course.

Background

Road users in New Zealand pay taxes which fund the public roads. Heavy (>3,500kg) and light vehicles that use diesel or another fuel not taxed at the source (like petrol) are required to pay road user charges (RUC). These charges are levied by Waka Kotahi under the Road User Charges Act 2012. Users that are required to pay RUC purchase distance licences in 1,000km units. Licences must be purchased in advance of travel and displayed in the vehicle.

There are three types of RUC systems:

• eRUC, which are end-to-end systems that automate the calculation, payment and display of RUC licences;
• eaRUC, which measure the distance travelled by vehicles and can automate the re-ordering of RUC licences; and
• paper RUC, where customers manually order RUC licences from Waka Kotahi.

We will give clearance to a proposed merger if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market.

Further information explaining how the Commission assesses a merger application is available on our website.

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