First Gas has been ordered to pay $3.4 million by the High Court after admitting it engaged in anti-competitive conduct when acquiring the Bay of Plenty gas distribution assets of GasNet.
“The penalty handed down by the High Court reflects the seriousness of this conduct and is sufficient to ensure that First Gas will not profit from the acquisition,” Commerce Commission chairman Mark Berry said in a statement
“It is also a reminder to businesses that anti-competitive acquisitions are a priority area for the commission and if there is any doubt about the competition effects of a merger, they should seek clearance from us first.”
Earlier this year the commission began proceedings in the High Court related to the firm’s 2016 purchase of 9.5 kilometres of steel and plastic pipelines that Whanganui-based GasNet laid in a new subdivision in Papamoa. At the time, it said First Gas, which operates the country’s trunk transmission pipelines and is the third-largest gas distributor after Powerco and Vector, bought the assets without a clearance or authorisation from it.
According to Berry, First Gas adopted a “concerted strategy” designed to force GasNet to leave the Bay of Plenty in breach the Commerce Act. This strategy included taking steps to duplicate pipelines GasNet had laid in new property subdivisions.
“First Gas sent a clear message to its competitor that its Bay of Plenty investment was under threat. GasNet’s shareholder decided its best course of action was to sell the business and agree to a restraint of trade that would prevent it from returning. This resulted in a long-term structural change in the market, removing competition between First Gas and GasNet for new development contracts,” Berry said.
In a separate statement, First Gas said it accepts the High Court’s ruling for costs relating to an acquisition the Commerce Commission said was likely to reduce competition.
“We made an error by not seeking Commerce Commission approval in the purchase of another gas infrastructure provider – it was an expensive oversight that could have prevented any breach of competition laws,” it said.
The company said that, at the time it had believed the transaction complied with the relevant regulations “but now accepts it had not fully considered the possible impact on other developers laying gas distribution networks, and it should have sought clarification from the commission.”
First Gas owns and operates more than 2,500 kms of high-pressure gas transmission pipes and about 4,800 kms of gas distribution pipes in the North Island.