PUBLIC COPY ISSN NO. 0114-2720 J4124 Decision No. 410 Determination pursuant to the Commerce Act 1986 (“the Act”) in the matter of an application for authorisation of a business acquisition involving: Ruapehu Alpine Lifts Limited and Turoa Ski Resorts Limited (in receivership) The Commission: M J Belgrave (Chairman) M N Berry P R Rebstock Summary of Proposal: The acquisition by Ruapehu Alpine Lifts Limited of the assets and operations of Turoa Ski Resorts Limited (in receivership). Determination: The Commission determines that it will grant an authorisation for the proposed acquisition pursuant to section 67(3)(b) of the Act. Date of Determination: 14 November 2000 CONFIDENTIAL MATERIAL IN THIS DECISION IS CONTAINED IN SQUARE BRACKETS [ ] 2 Table of Contents THE PROPOSED ACQUISITION........................................................................................5 THE PROCEDURES...............................................................................................................5 THE PARTIES.........................................................................................................................6 Ruapehu Alpine Lifts Limited (“RAL”).............................................................................................................6 Turoa Ski Resort Limited (in receivership) (“TSR”) ........................................................................................6 Sutton McCarthy Limited (“Sutton McCarthy”) ..............................................................................................7 BACKGROUND ......................................................................................................................7 New Zealand Ski Industry ...................................................................................................................................7 North Island Ski Fields.........................................................................................................................................8 South Island Ski Fields.........................................................................................................................................9 Department of Conservation (“DOC”)...............................................................................................................9 New Zealand Ski Council (“NZ Ski Council”).................................................................................................10 Ngati Rangi..........................................................................................................................................................10 Ngati Tuwharetoa...............................................................................................................................................11 Regional Development........................................................................................................................................11 Recent Ski Industry Developments ...................................................................................................................11 Decision 357.........................................................................................................................................................12 THE RELEVANT MARKETS.............................................................................................12 Introduction ........................................................................................................................................................12 Market Definition ...............................................................................................................................................14 Introduction......................................................................................................................................................14 Product Dimension ..........................................................................................................................................14 Geographic Extent ...........................................................................................................................................16 Functional Dimension......................................................................................................................................28 Conclusion on Skiing Market Definition.........................................................................................................28 Other Markets ....................................................................................................................................................28 Conclusions on Market Definition.....................................................................................................................29 COMPETITION ANALYSIS...............................................................................................29 Overview..............................................................................................................................................................29 3 The North Island Skiing Market .......................................................................................................................30 Market Concentration........................................................................................................................................30 Constraint from Existing Competitors .............................................................................................................31 Conclusion on Constraint from Existing Competitors .....................................................................................31 Constraint from Potential Competition............................................................................................................31 Conditions of Entry..........................................................................................................................................32 Conclusion: Entry Conditions..........................................................................................................................34 Assessment of the Constraint from Potential Competition.............................................................................34 Likelihood of Entry..........................................................................................................................................35 Extent of Entry.................................................................................................................................................35 Timeliness of Entry..........................................................................................................................................35 Sustainability of Entry .....................................................................................................................................36 Conclusion on Constraint from Potential Competition....................................................................................36 Internal Constraints ...........................................................................................................................................36 Conclusion on Internal Constraints..................................................................................................................38 Other Competitive Constraints .........................................................................................................................39 South Island Ski Fields ....................................................................................................................................39 Other Leisure Activities...................................................................................................................................39 Skier Expectations ...........................................................................................................................................40 Inability to Price Discriminate .........................................................................................................................41 Conclusion on Other Competitive Constraints ................................................................................................41 Conclusion on Dominance in the North Island Skiing Market.......................................................................42 PUBLIC BENEFITS AND DETRIMENTS ........................................................................42 Introduction ........................................................................................................................................................42 The Counterfactual.............................................................................................................................................44 Introduction......................................................................................................................................................44 An Alternative Buyer of TSR ..........................................................................................................................44 Characteristics of the Counterfactual...............................................................................................................46 Conclusion on the Counterfactual....................................................................................................................55 DETRIMENTS.......................................................................................................................55