This section contains information about the assessment of the likely benefit to New Zealand arising from the factor relating to added market competition, greater efficiency or productivity or enhanced domestic services.
Will the overseas investment result in, or is it likely to, result in, added market competition, greater efficiency or productivity, or enhanced domestic services, in New Zealand (section 17(2)(a)(iv))?
Key elements of this factor
There are three key elements to this factor:
- The overseas investment must be likely to result in one or more of:
- added market competition;
- greater efficiency or productivity; or
- enhanced domestic services.
- The added market competition, greater efficiency or productivity, or enhanced domestic services must occur in New Zealand.
- The added market competition, greater efficiency or productivity, or enhanced domestic services that is likely to result from the overseas investment must be additional to that which is likely to occur without the overseas investment.
Added market competition
Added market competition usually results from the addition of new players or supply (quantity or quality) in a specific market where the additional players or supply will have a measurable increase in competition.
A market includes only those products or services that are seen as close substitutes. Products and services are in the same market where consumers will switch between products if relative prices change.
An increase in competition will usually result in a decrease in market power for one or more businesses in a market. Added market competition is often reflected in lower prices, higher quality or better service.
It is not sufficient to simply state that the overseas investment will add a player or increase supply in a market; an applicant must demonstrate that the overseas investment is likely to noticeably increase competition in a specific market in New Zealand.
In assessing the existing competition in a market it is appropriate to consider the number, market share and behaviour of businesses in a market. If the market is already competitive, it is less likely that there will be a noticeable increase in competition in the market as a result of the overseas investment.
Greater efficiency or productivity
Greater efficiency or productivity is an increase in the value of goods or services produced relative to the value of inputs such as capital and labour. Increases in productivity typically result from the introduction of new technology or business processes, improved marketing or distribution, or economies of scale.
Enhanced domestic services
Domestic services are enhanced if the quality or quantity of an existing service is improved, or a new service is introduced. This factor only applies to services and does not include goods.
The service may be “down-stream” from the investment being considered. However the more direct the relationship between the overseas investment and the enhancement in domestic services, the more relevant this factor will be.
Making a claim
Provide the following information when making a claim under this factor:
- Added market competition:
Where an applicant is making a claim of added market competition the following information is required:
- Method: the method by which competition is likely to be added to the relevant market (e.g. adding more players or supply (quantity or quality) of a product or service);
- Market: identify and describe the market in which competition will be added (including the current level of competition within that market);
- Effect: the effect that the added competition is likely to have on the market (e.g. lower prices, better quality, more choice or greater innovation); and
- Commerce Commission: whether the overseas investment is the subject of a clearance application with the Commerce Commission.
- Greater efficiency or productivity:
Where an applicant is making a claim of greater efficiency or productivity the following information is required:
The method by which greater efficiency or productivity will be achieved (e.g. installing a new production line in a factory which will be used to generate products at a lower unit cost);
The form that the greater efficiency or productivity is likely to take; and
The projected changes in output or profit (units or revenue per financial year) or projected input/output ratios (for example stock units/ha, net profit/ha per financial year).
- Enhanced domestic services: Where an applicant is making a claim of enhanced domestic services the following information is required:
The method by which domestic services are likely to be enhanced; and
- Domestic services:
The domestic services that are likely to be enhanced.
Where added market competition, greater efficiency or productivity, or enhanced domestic services is likely to occur.
When the added market competition, greater efficiency or productivity, or enhanced domestic services is likely to occur. If the added market competition, greater efficiency or productivity, or enhanced domestic services is to occur over a particular timeframe, specify the financial years over which it is likely to occur and the amount that will occur in each of those financial years.
The level of competition in the relevant market, the level of efficiency or productivity, or the enhancement of domestic services that is likely to occur in New Zealand without the overseas investment using the same measurements as above.
Any precondition that may prevent the added market competition, greater efficiency or productivity, or enhanced domestic services from occurring (e.g. resource consents).
Conditions of consent
All consents are granted subject to conditions. Consent conditions will generally require consent holders to deliver, and report on, the benefits claimed in their application. The OIO monitors all consents to ensure that conditions are complied with.