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Long-term view taken in Commerce Commission decision

Home Insights Long-term view taken in Commerce Commission decision

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Published on: February 28, 2017

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The Commerce Commission’s decision to decline clearance for the Sky/Vodafone merger was founded on New Zealand's pretty unique lack of content regulation and a longer term approach to competition.

Last week, the Commerce Commission rejected the proposed merger of Sky TV and Vodafone New Zealand shortly after the Court had agreed to stay the clearance if the enforcer had decided to clear it.

Acting for Spark, Russell McVeagh partners Sarah Keene and Troy Pilkington, observed that in blocking the merger, the Commission emphasised the importance of not just looking at competitive effects in the immediate future, when other telecommunications companies would likely try to respond to new offers from the merged Sky/Vodafone. Ms Keene said that this in part, reflected the test the Commission has to apply in a clearance process.

“To give clearance, the parties had to convince the Commission that there was no credible scenario in which a business that owns most of the major sports rights, two cable networks, and a significant share of the mobile and broadband markets, could realistically foreclose competition.

“Ultimately, that was a high hurdle, particularly when you look at overseas jurisdictions in which other competition regulators have recognised the importance of sport to drive consumer behaviour,” she said.

Troy Pilkington said, “The impacts on competition on a forward-looking basis into the medium and longer term, for example, the ability of those competitors to invest, innovate, and compete in the face of bundles from Sky/Vodafone that include ‘must have’ sports content, were considered in the decision.

“In applying its forward-looking test, the Commission also emphasised the importance of the roll-out of ultra-fast broadband, as increasing consumer uptake of this will be an opportunity for companies to target new customers with bundled telco/content offers.”

The deal would have tied up Sky’s ownership of a number of long-term licences to effectively all of New Zealand’s premium sports content, coupled with Vodafone’s strength in the mobile and broadband markets. New Zealand has no anti-siphoning legislation and no regulation of sports of national significance as other jurisdictions do. As a result, the combination created too high a risk of market foreclosure for the Commerce Commission to approve the transaction. 

Only the day before the Commission’s decision, InternetNZ, Spark and 2 Degrees had argued to the Court that if clearance had been issued, and the merger closed on the basis of that clearance, that would have left them without recourse against the decision. Cleared deals have statutory immunity from appeals so long as they close within a year of decisions being issued.

Representing Spark, Russell McVeagh Partner Sarah Armstrong, said the stay proceedings were the first time the High Court has had to consider whether it could delay a clearance decision to allow third parties who had participated in the Commission's process, time to consider whether to judicially review it.

“We expected that completion would occur immediately on receipt of clearance, and the Commission’s reasons would take weeks to be completed. This would have left no opportunity for third parties, who opposed the transaction, to act once it was released.”

The Russell McVeagh team acting for Spark in relation to the Commission’s clearance process was Sarah Keene, Troy Pilkington and Hannah Loke, working closely with Spark’s GM of Regulation, General Counsel Melissa Anastasiou and in-house competition and regulatory counsel, Sasha Daniels.

Assisting the clearance team with the urgent interim orders application was Russell McVeagh partners Sarah Armstrong – head of litigation, and Chris Curran – public law specialist, together with senior counsel David Shavin QC and senior solicitors Varoon Kumar and Bridget Fenton.

For more information, please contact:

Joanna Comerford
Corporate Communications Manager
[email protected]
D: +64 4 819 7520

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