NZ approval likely for HP deal

The New Zealand Commerce Commission has a deadline of Thursday to approve or reject Hewlett-Packard New Zealand's application to acquire Compaq New Zealand.

Approval looks likely despite the new entity's market share- on paper at least - being at levels which the commission might consider would substantially lessen competition. A combined HP-Compaq would have close to or slightly greater than 40% market share in the printer, PC server and enterprise storage markets.

The head of the commission team considering the application, Richard Braae, says because an applicant's post-merger market share might be at these so-called "safe harbour" levels, that doesn't automatically mean the merger would be blocked. He wouldn't comment on the specifics of the HP application.

However, he says where a merger might substantially lessen competition in part of a market, an applicant might give an undertaking to divest itself of that part of its business.

A guide to what the commission might decide could come from the European Commission, which in late January gave its blessing to the merger.

According to Victoria University professor of economics Neil Quigley, the New Zealand body tends to be more liberal than its European counterpart.

"It's hard to generalise because we have a changed Commerce Act but I suspect in many circumstances our commission is more liberal than other countries. It recognises we're a small, open economy."

That implies that for products for which there is a global market - as is the case for IT goods and services - it is easy for competitors to respond to market moves by the merged entity. Quigley says market share is only "a rough rule of thumb" when it comes to ruling on applications.

"What the commission also looks at is increasing market power; the ability of other suppliers to compete if the combined entity raises prices, for example."

A veteran New Zealand end user advocate, Alan Dick, doesn't believe computer buyers will be disadvantaged if the merger proceeds.

"I don't see it reducing competition," says Dick, who is leading efforts to revive a user group representing customers of Digital, which Compaq bought in 1998. He can see benefits in the bringing together of products from HP and Compaq, particularly in the Unix market.

"It's probably an opportunity to take the best from HP-UX and Tru64. Compaq's strength in clustering makes that an interesting prospect."

HP-Compaq competitors are not willing to comment on the merger application. The head of SolNet, the Sun New Zealand agent, Mark Botherway, says he will be giving his view to the commission as part of its deliberations. But he says he's not aware of any "undue concern" on the part of Sun about the deal.

IBM New Zealand head Nick Lambert is also refusing to comment publicly on the application.

The commission can ask a merger applicant for more time to consider an application beyond the statutory 10 days clearance time. But a specialist on the commission's deliberations doesn't think the HP application is so complex that it will run over time.

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