Public Version ISSN NO. 0114-2720 J6058 Commerce Commission Decision No. 507 Determination pursuant to the Commerce Act 1986 in the matter of an application for clearance of a business acquisition involving: ANZ BANKING GROUP (NEW ZEALAND) LIMITED and NBNZ HOLDINGS LIMITED The Commission: Denese Bates QC Donal Curtin Shaan Stevens Summary of Application: The acquisition by ANZ Banking Group (New Zealand) Limited ("ANZ") or a related company nominated by ANZ of all the shares and assets of NBNZ Holdings, the New Zealand holding company of The National Bank of New Zealand Limited and its controlled subsidiaries ("National") from its parent, Lloyds TSB Bank plc. Determination: Pursuant to section 66(3) (a) of the Commerce Act 1986, the Commission determines to give clearance for the proposed acquisition. Date of Determination: 25 September 2003 CONFIDENTIAL MATERIAL IN THIS REPORT IS CONTAINED IN SQUARE BRACKETS 1 CONTENTS EXECUTIVE SUMMARY...................................................................................................................................... 4 THE PROPOSAL ...........................................................................................................................................................................4 MARKET DEFINITION..................................................................................................................................................................4 COUNTERFACTUAL .....................................................................................................................................................................4 MARKET SHARES........................................................................................................................................................................5 COMPETITION ANALYSIS ............................................................................................................................................................5 OVERALL CONCLUSION.................................................................................................................................... 7 THE PROPOSAL..................................................................................................................................................... 8 THE PROCEDURES ............................................................................................................................................... 8 THE PARTIES ......................................................................................................................................................... 8 ANZ ....................................................................................................................................................................... 8 NATIONAL .............................................................................................................................................................. 9 OTHER RELEVANT PARTIES............................................................................................................................ 9 WESTPAC BANKING CORPORATION (“WESTPAC”)................................................................................................ 9 BANK OF NEW ZEALAND LIMITED (“BNZ”).......................................................................................................... 9 ASB BANK LIMITED (“ASB”).............................................................................................................................. 10 KIWIBANK LIMITED (“KIWIBANK”) ..................................................................................................................... 10 SUPERBANK LIMITED (“SUPERBANK”) ................................................................................................................ 10 TSB BANK LIMITED (“TSB”)............................................................................................................................... 11 HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED (”HSBC”) ....................................................... 11 RABOBANK NEW ZEALAND LIMITED (“RABOBANK”)......................................................................................... 11 PSIS LIMITED (“PSIS”)........................................................................................................................................ 11 NEW ZEALAND ASSOCIATION OF CREDIT UNIONS (“NZACU”) ......................................................................... 12 NEW ZEALAND BANKERS ASSOCIATION (“NZBA”) ........................................................................................... 12 INTERCHANGE SETTLEMENT LIMITED (“ISL”) .................................................................................................... 12 ELECTRONIC TRANSACTION SERVICES LIMITED (“ETSL”)................................................................................. 13 VISA NEW ZEALAND LIMITED (“VNZL”)............................................................................................................ 14 INDUSTRY BACKGROUND............................................................................................................................... 15 STRUCTURE .......................................................................................................................................................... 15 Products and Customers................................................................................................................................. 16 Merchant Acquiring Services ......................................................................................................................... 17 Interbank Trading in Financial Markets........................................................................................................ 18 History of Entry and Exit................................................................................................................................ 19 CONDUCT.............................................................................................................................................................. 20 PERFORMANCE ..................................................................................................................................................... 20 PREVIOUS DECISIONS ...................................................................................................................................... 21 NZ COMMERCE COMMISSION .............................................................................................................................. 21 AUSTRALIAN COMPETITION AND CONSUMERS COMMISSION (“ACCC”)............................................................ 22 MARKET DEFINITION....................................................................................................................................... 23 RELEVANT MARKETS ........................................................................................................................................... 24 Product Market ............................................................................................................................................... 24 Demand Side Substitutability.......................................................................................................................... 25 Supply Side Substitutability ............................................................................................................................ 27 Conclusion on product market ....................................................................................................................... 28 Functional Market .......................................................................................................................................... 28 Geographic Market......................................................................................................................................... 29 CONCLUSION ON THE RELEVANT MARKET.......................................................................................................... 29 COUNTERFACTUAL........................................................................................................................................... 30 2 COMPETITION ANALYSIS ............................................................................................................................... 31 INTERBANK TRADING IN FOREIGN EXCHANGE MARKET..................................................................................... 32 INTERBANK TRADING IN MONEY MARKET.......................................................................................................... 32 INTERBANK TRADING IN BOND MARKET............................................................................................................. 34 FINANCIAL PLANNING .......................................................................................................................................... 35 MANAGED FUNDS................................................................................................................................................. 35 INSURANCE........................................................................................................................................................... 35 PERSONAL LOANS ...............................................................................................................................................