The Wellington High Court has ordered First Gas Ltd to pay $3.4 million after it admitted engaging in anti-competitive conduct when acquiring the Bay of Plenty gas distribution assets of GasNet Ltd, the Commerce Commission says.

Whanganui-based competitor GasNet entered the Bay of Plenty gas reticulation market in late 2015. First Gas entered the same market by purchasing the non-Auckland distribution assets of Vector in April 2016.

Commerce Commission Chairman Dr Mark Berry says First Gas adopted a concerted strategy designed to force GasNet to leave Bay of Plenty in breach of sections 47 and 27 of 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,” says Dr Berry.

“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. 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.”

In her judgment, Justice Mallon said: “First Gas personnel at a senior level engaged in a concerted effort on a reluctant seller to remove a competitor. First Gas was successful in its effort, and the effect on the market is on-going and is potentially permanent. The conduct has removed existing competition and is likely to have removed future competition in the market for the foreseeable future.”

The Commission says First Gas co-operated with its investigation and as part of the resolution has agreed not to enforce the restraint of trade against Gas Net.