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Commission closes Heatcraft NZ investigation

NEW ZEALAND: The New Zealand Commerce Commission has closed its investigation into Swedish refrigeration wholesaler Beijer Ref’s acquisition of Heatcraft New Zealand in 2018.

Under competition rules, the Commission opened an investigation in July into both Beijer Ref’s acquisition of Heatcraft NZ and its 2019 acquisition of a grandparented right to import HFCs into New Zealand. 

The five-month investigation concluded today with the Commission deciding to close the investigation on the basis of “insufficient evidence” to establish that either transaction had “substantially lessened competition” and that further significant investigation would be required to reach a concluded view.

The acquisition in 2018 saw Beijer Ref acquiring Heatcraft Australia Pty, of which Heatcraft NZ was a group company. On completion, the assets of the Heatcraft NZ business were immediately sold to wholesaler Reece New Zealand. Beijer Ref, however, retained ownership of Heatcraft NZ, changing its name to Kirby. 

Reece is a wholesale supplier of refrigerants, air conditioning and refrigeration equipment and related components in New Zealand.

HFC regulations

The subsequent introduction of New Zealand’s HFC regulations, meant that companies wishing to import HFCs required a permit – grandparented permits (accounting for 80% of all imports) for companies that imported HFCs between 1 January 2015 and 31 December 2017, and special permits for everyone else. 

Both Beijer Ref, through Kirby, and Reece applied for grandparented eligibility on the basis of their respective association with the Heatcraft NZ business. Beijer Ref’s other subsidiaries, Realcold and Patton, also applied for grandparented eligibility.

New Zealand’s Environmental Protection Agency subsequently granted grandparented eligibility to Kirby and declined Reece’s application. The EPA determined that Kirby (previously named Heatcraft NZ) was the legal entity that could demonstrate making the historical imports.

As such, despite owning Heatcraft NZ’s business assets, Reece was unable to attain sufficient permits from the EPA to allow it to import HFCs commensurate with Heatcraft’s historical position when the regulations came into force.

The primary focus of the investigation was to determine whether the Heatcraft acquisition and/or the grant of eligibility may have allowed Beijer to profitably increase the price of HFCs, resulting in a likely substantial lessening of competition.

It was decided that while Beijer Ref hold 35% of the grandparented permits, competitors Chemiplas have 29% and BOC have 14%, with the remainder held by several small importers.

The Commission also pointed to the “use it or lose it” provisions of the regulation which provide an incentive for for permit holders to supply excess imported HFCs to competitors. 

The Commission also noted that Reece is pursuing its own legal action against Beijer, which includes alleged breaches of the Act.

Related stories:

Beijer Ref rejects Heatcraft acquisition claims24 July 2020
NEW ZEALAND: Beijer Ref insists it has not breached any competition rules and is entitled to HFC import quota rights following its acquisition of Heatcraft NZ in 2018. Read more…

Beijer Ref to buy Heatcraft Australia – 14 March 2018
SWEDEN/AUSTRALIA: Beijer Ref is set to acquire Heatcraft Australia Pty, one of the largest refrigeration wholesalers in the region. Read more…

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