'Failing firm' takeover rules re-examined

Thursday 9th July 2009

The Commerce Commission is reviewing rules for applications to acquire "failing firms" in light of an expected increase in such applications, reflecting current economic conditions.

"The Commission has not yet seen an increase in applications using a failing firm argument, but anticipates that there may be more as a result of the current economic climate," the commission chairman, Dr Mark Berry said.

"The Commission's normal competition analysis applies to failing firms situations and we will not be relaxing our standards when considering such cases. It is important to note that the circumstances of claims that a firm is failing vary and that each case is assessed on its facts."

Simply claiming a decline in profitability in insufficient to demonstrate that a firm was "failing", and the commission is particularly wary of applications involving allegedly failing divisions of firms, and would expect detailed internal company accounts to rule on such an application.

However, the commission recognises that in genuine "failing firm" applications, time will often be of the essence. The draft new guidelines are intended to lay out the range of information that the commission would need to see in order to be able to reach a view quickly in such situations.

The draft guidelines are available for comment through the commission's website, www.comcom.govt.nz.

Businesswire.co.nz

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