The Commerce Commission has granted clearance to Pact Group Holdings Limited (Pact) to acquire the assets and business of Flight Plastics Limited in New Zealand and the packaging-related assets of Flight Extruded Plastics LP in Adelaide (together, Flight). Flight's assets include a wash plant, which Flight uses to make packaging from plastic waste that has been put out for recycling by consumers and collected by waste management firms.
Pact and Flight both manufacture and supply rigid plastic packaging made of polyethylene terephthalate (PET). PET is commonly used as a container for food such as meat and seafood, fresh fruit and baked goods. PET is known as the Type 1 plastic for recycling purposes, and can be repeatedly recycled and remade into new packaging. Such recycled packaging is sometimes referred to as RPET packaging. Competition to supply PET (including RPET) packaging to these, and other, customers was the focus of the Commission's investigation.
Chair Anna Rawlings said the Commission is satisfied that the proposed acquisition is unlikely to substantially lessen competition in any New Zealand market.
"Although Pact and Flight are two of the largest suppliers of PET packaging in New Zealand, our investigations indicate that the merged entity is likely to be constrained in its ability to raise prices or reduce service quality. In particular, it will face competition from a number of New Zealand-based manufacturers and importers of PET products, several of which have the ability to expand. Several large customers also appear to have the ability to support smaller suppliers." said Ms Rawlings.
"Our investigation also found that customers are increasingly considering environmental impact when seeking packaging, and in future the merged entity's PET products may also face increasing competition from other types of packaging."
In addition to packaging, the Commission also considered the potential impact on competition for the purchase of bales of recycled PET, as well as PET offcuts created by other manufacturers of PET products. Both of these products can be recycled and used to manufacture PET packaging. However, Ms Rawlings said that "the Commission was satisfied that there are sufficient alternatives for sellers of PET bales and offcuts such that the proposed acquisition would be unlikely to substantially lessen competition in these markets."
A public version of the written reasons will be available shortly on the Commission's case register.
Background
Pact is a packaging solutions business with over 100 sites and 6000 employees worldwide. Its primary focus is the manufacture and supply of rigid plastic packaging for customers in the food, beverage, chemical, industrial and agricultural sectors. In New Zealand, Pact manufactures and supplies plastic packaging products to a range of customers.
Flight is a manufacturer of plastic sheets and packaging in Australia and New Zealand, including for fruit and produce, bakery, meat and seafood, and nursery and horticulture. Flight has plastic packaging plants in Wellington and Adelaide. Flight also has a plastic sheet plant in Adelaide but this is not part of the Acquisition. Flight's Wellington plant can process waste plastic collected locally and turn it back into food-grade plastic packaging.
The Commission will give clearance to a proposed merger if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market.
