Air N.Z. decision reserved

Press, 3 July 1985, Page 35

Air N.Z. decision reserved

PA Wellington The Chief Justice, Sir Ronald Davidson, has reserved judgment on the appeal by Air New Zealand against the Commerce Commission decision not to allow the airline to take over the Mount Cook Group. Two days of hearings on the appeal ended yesterday, with the first half of the day devoted to defence of the decision led by Mr Tom Gault, Q.C., appearing for the Examiner of Commercial Practices. Much of the defence was given over to answering the arguments put up the previous day by Air New Zealand’s lawyers. The main thrust of these was that, in a similar application for Mount Cook by Goodman Group, the Commerce Commission had identified Air New Zealand and Mount Cook as operating in different markets. But in its decision on the Air New Zealand application a week later, the Commission appeared to regard both airline operators as working in the same market, the airline submitted. However, the Commission had not so much changed its stance as faced different circumstances, Mr Gault said. The possibility that allowing the Goodman application would mean integration of Newmans Air and the Mount Cook airline had not necessitated an examination of Air New Zealand’s role in domestic aviation. “The Air New Zealand case necessitated further analysis because of the different boundaries within which the market was structured,” said Mr Gault. In these circumstances, the tourist air services market could not be regarded as a separate market — as happened in the decision on the Goodman application — but as a sub-market of total domestic air services, he submitted. Mr Gault also contended that the domestic air services market had been artificially structured since 1973 when Air

New Zealand and Mount Cook reached mutual agreement on the sharing of airline routes. “In the Air New Zealand case, the commission went on to analyse whether things as they stand should be seen as the true market," Mr Gault said. There was also considerable potential for competition between Mount Cook and Air New Zealand off the main trunk routes, he said. The fact that the original Air New Zealand application to the Commission had not identified separate markets among existing domestic air services showed this was not part of their rationale for being allowed to buy into Mount Cook, he said. Counsel for Air New Zealand, Mr David Williams, had also contended that the Commission should approve the airline’s application conditionally — a step taken with some other approvals. But Mr Gault said this was only one of three alternatives for the Commission and there was no obligation to find appropriate conditions to allow approval of an application. Imposing conditions preventing Air New Zealand from favouring Mount Cook over competitors would be more difficult to police than in other cases. “This is a very complex service industry with many facets of potential preference,” he said. Mr Gault also submitted that the Air New Zealand application served to cut off potential competition. "The risk of entry is itself an element of competition,” he said. “If Mount Cook, if seen as a potential entrant, is removed because of acquisition then that certainly removes that element of competition.” Air New Zealand’s status as a Government-owned corporation should not change the way the Commission approached its application, he said. He disagreed with the airline’s argument that the Commission had failed to weigh the benefits of the application, saying they were clearly outweighed by negative factors. The Court also heard submissions from counsel assisting the court, Mr Tony Keesing, and reiteration of the Air New Zealand position from Mr Williams.