Commission rejects merger proposal
The application by Air Niugini subsidiary, Link PNG, to buy majority shares in PNG Air has been declined by the Independent Consumer and Competition Commission.
This was affirmed today by the competition regulator under its provisions of Mergers and Acquisitions in the ICCC Act, amended in July 2018, making it compulsory for major mergers and acquisitions to seek approval from the competition regulator before they proceed to such ventures.
The proposed acquisition is for 40 per cent shares of Nasfund in PNG Air Limited by Link PNG Limited.
ICCC general manager Brian Ivosa explained that the application for authorization was lodged with the ICCC on May 22 this year, the decision was issued to the applicant last week, Friday, September 4.
“As part of our assessment to issue authorisation for an application, there are two test approaches for business mergers and acquisitions. That is competition test followed by public benefit test.
“Based on available information the ICCC has formed the view that if the proposed acquisition is allowed it will cost serious harm to the current level of competition in the relevant markets identified which is that if the proposed acquisition proceeds it will remove or weaken the only strong competitor which is PNG Air and would effectively create a monopoly,” Mr Ivosa said.
He added that though Link PNG claimed PNG Air would remain a separate entity post acquisition, the regulator noted that Link PNG and Air Niugini will have some influence over the operations of PNG Air.
“It is expected that fares will increase and decline in service standards, although Link PNG claimed that the fares will not increase the ICCC did not give much weight on this because as we all know this does not happen in a monopoly market or environment,” Mr Ivosa said.
“With high barriers to entry the possibility of a new entrant that can effectively compete with Air Niugini is not possible for Link PNG.”
The commission also considered other factors, which it affirmed were confidential but could have considered historical aspects of the industry and performance of the investments made by Nasfund, which ICCC maintained could still sell its shares to any other interested party.
While ICCC’s executive manager Steven Sugl explained there was no appeal process in the governing section of authorising such acquisitions, Link PNG has the preference to go to court or reapply with the concerns in mind made by the ICCC.
Public copies of the determination can be accessed from ICCC online or at its offices.