Government promises hands-off stance on sale

By BRIAN FALLOW

It is likely to be the middle of next year before the Commerce Commission rules on Qantas' buying into Air NZ, the Government says.

Though an application to the commission is not expected for a couple of weeks, the parties are likely to seek an authorisation, rather than the more straightforward clearance.

For an authorisation, the applicants concede that the transaction would substantially lessen competition, but argue that it should be approved because the public benefits outweigh the detrimental aspects.

The process normally involves a public hearing or conference, plus submissions from interested parties.

The Government emphasises that it will be taking a hands-off approach to the commission's deliberations.

In particular, Transport Minister Paul Swain said yesterday that the Government would not issue a section 26 notice under the Commerce Act.

Section 26 notices are statements of Government economic policy that the commission is required to "have regard to". They are not meant to pre-empt a decision, but they are meant to be influential.

The transaction will also have to get past the Australian Competition and Consumer Commission.

Although New Zealand competition law is modelled on Australia's, Chapman Tripp partner Grant David said there was a difference which limited room for manoeuvre on this side of the Tasman.

The Commerce Commission could grant an authorisation conditional on undertakings to dispose of assets or shares, but unlike the Australian body it could not take cognisance of "behavioural" undertakings, where the parties eased regulatory concerns by promising to do, or not do, certain things.

Buddle Findlay partner Bernard Hill said that when in the mid-1990s the commission rejected Air NZ's plan to take over Ansett NZ, it placed a big value on domestic competition.

It would be interesting to see how Qantas squared the position it took then, when it did not own a domestic airline in New Zealand, and now.

"Qantas made a big thing of the significance of domestic competition in the regional market, especially since at that point it was relying on competition between Air NZ and Ansett to provide it with economic offloading for inbound tourists.

"It was very concerned to maintain the option [of competing domestic carriers in New Zealand]."

Both David and Hill expect much of the argument to relate to changes in the international market and the need for alliances and global scale.

Though the commission is normally confined to domestic competition, it is able to consider air services to and from New Zealand.

Before assessing the effects of the proposed transaction, the commission will have to decide what alternative to compare it with. Continuation of the status quo is one option, but it may also consider the possibility of the sale of a shareholding to a foreign airline other than Qantas.

It will also consider barriers to entry - how difficult it would be for another airline like Virgin Blue to enter the local market.

THE BENCH

The five Commerce Commissioners likely to hear the airline application are:

* John Belgrave. After a career in the public service which included terms as secretary of justice and of commerce, he was executive director of the Bankers Association, then the Electricity Supply Association before becoming the commission's chairman in 1999.

* Paula Rebstock, an economist and the commission's deputy chairwoman. Now Auckland-based, she has worked in the Treasury, the Department of the Prime Minister and Cabinet, and the Department of Labour.

* Donal Curtin, also an Auckland-based economist. A former chief economist of the BNZ, he advises Parliament's finance and expenditure select committee on monetary policy.

* Denese Bates, QC. A barrister since 1981 she has had a long involvement with both the Auckland and New Zealand Law Societies.

* Peter Taylor, a chartered accountant and chairman of the Public Trust.