Court ruling places takeovers on hold

By Nick Smith

Friday 21st September 2001

The government is facing a legislative nightmare after a Court of Appeal decision exposed flaws in the Interpretations Act 1999.

The act covers transitional periods, such as the move from old rules to new rules in the Commerce Act, at the centre of a potential $3 billion business mess.

In a split decision, the court ruled the Commerce Commission should have used the new rules in assessing the takeover applications, threatening 11 merger deals worth $3 billion.

The government is now rushing legislation into Parliament under urgency to fix the mess created by its May 26 Commerce Commission rule change.

Commerce minister Paul Swain is warning other parties, which can object to the move in a Statutes Amendment Bill, that "if this opportunity (is) denied, it will mean that this legislation will have to be delayed."

"I am calling on the critics to put aside petty personal politics ... for the best interests of the New Zealand economy."

According to critics, the rushed legislative quick fix is a clear admission that the government got it wrong when it amended the Commerce Act by not specifically addressing the transition from old to new rules.

But Mr Swain said all legislation passed since the Interpretations Act 1999 relied on the act to cover transition issues such as those in the Commerce Act amendment.

"It has thrown into doubt the ability of the Interpretations Act 1999 to be able to deal with transitional situations like this in other legislation.

"In the long term, the government will address that issue as well."

Businesses are now hoping Mr Swain's legislative quickfix will allow all 11 merger deals to proceed without being revisited by the commission.

Carter Holt Harvey general counsel Nicolas Short said he would be disappointed if political sniping stopped the amendment.

"It would be silly to try to make a political football out of the issue," he said.

Progressive's Ted van Arkyl said all parties all parties needed to work together to ensure the deals went ahead.

The merger deals are worth about $3 billion and approved by the commission under the old rules but after government legislation took effect are now under threat.

Supermarket chain owner Foodstuffs successfully challenged in the Court of Appeal commission approval for rival operator Progressive to buy Woolworths.

The court ruled the commission should have used the tougher test of substantially lessening competition when assessing the takeover.

Among companies affected by the decision are the $2 billion Carter Holt Harvey acquisition of Central North Island Forestry Partnership.

Others are National Gas Corporation Holdings (buying AGL NZ Energy), Lowe Corporation (Colyer Mair), Solid Energy (Todd Coal), Caltex (Challenge Petroleum), Computershare registry Services (BT Portfolio), Nelson Pine Industries (Rayonier) and Howard Smith (OPSM).

Company representatives were loath to criticise the government on the record but many questioned why when framing the legislation it had not specifically addressed the problem not exposed.

Solid Energy chief executive Dr Don Elder said: "Everybody agrees that it's unfortunate, everybody has been caught by surprise and are disappointed.

"The government was disappointed and surprised as we were."

The problem is the transition period where applications are lodged when the old rule is in place but heard by the commission when the new rule is in place.

National Party commerce spokesman Tony Ryall said the government was responsible for the mess and was an example of "ministerial incompetence."

Commerce minister Paul Swain said it was clear that "what the Court of Appeal decided is not what the government intended."

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