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• Issue C2

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• Commerce Act Pts 4/4A/5 Review

• Authorisation and Clearance

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Options

46. An option would be to allow the original applicant to seek a variation to an approved undertaking to divest shares or assets. The Commission would be able to approve the variation if it considered that the variation was minor or would not otherwise defeat the competition or public benefit objectives of the Act.

Analysis

Quality of outcomes, predictability, timeliness and cost effectiveness

47. At present, an applicant who decides that compliance with the exact terms of an approved undertaking may be unnecessary or counterproductive has three choices. One is to comply with the undertaking in full. Another is to make the variations but in the knowledge that the protection of the Commission's approval will not apply. The third is to re-apply to the Commission for a clearance or authorisation subject to the proposed revised terms. The first option might result in suboptimal outcomes. The second does not rate well from a legal certainty perspective. The third is poor from a timeliness and cost effectiveness perspective. The option of allowing the applicant to seek a variation would overcome all of these problems.

Gaming the legal system

48. As a general rule the longer the time that passes after a merger is consummated, the more difficult it can be to divest assets. Premises can be closed, staff can be relocated or made redundant, and property, plant and equipment can be commingled or decommissioned. Thus, the ability to vary undertakings after the event may encourage parties to make spurious applications in the hope that it will be impractical to sell the assets by the time the Commission has made a decision.

49. We consider that this risk would be minimal as long as the undertakings could be enforced through correcting, punitive and compensatory orders.

Conclusion

50. The inability of the Commission to approve variations to undertakings after the clearance or authorisation decision has been made appears to be unnecessarily rigid. Greater flexibility in this regard would provide the opportunity for minor variations to be made without losing the protection of the original approval.