Southern Cross at last legal

By DANIEL RIORDAN

After more than a year of wrangling, Southern Cross Healthcare's spat with the Commerce Commission yesterday reached its final arbiter, the Court of Appeal.

The commission is appealing against a High Court ruling that it erred in blocking Southern Cross's full takeover of its biggest rival, Aetna Health.

Southern Cross, the country's biggest health insurer, last year needed three attempts, and an undertaking to divest Aetna's medical insurance policies, before the market watchdog gave it clearance to buy Aetna.

The commission was worried that Southern Cross would acquire too much market dominance.

But it was prepared to allow Southern Cross to acquire Aetna's primary healthcare business and its state-of-the-art computer systems.

However, the High Court ruled in March that the commission had erred in blocking the full takeover, saying the overwhelming market share Southern Cross would gain would be offset by low barriers to market entry, and that the commission had defined that market too narrowly.

The commission is appealing against that judgment.

The parties have taken this long to get to the Appeal Court largely because the barrister representing Southern Cross, Dr Jim Farmer, QC, has been busy as acting chairman of Air New Zealand.

The High Court setback was the commission's first in its key domain of business acquisitions in almost a decade.

Competition law experts told the Business Herald that the cracks revealed in the commission's work were likely to encourage other companies to pursue takeovers they might otherwise have let go.

Christchurch QC John Fogarty is representing the commission in a hearing set down for three days, but the commission expects it to take no more than two.