Regulators explain blocking DFS purchase of Nuance New Zealand

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Andrew Pentol

24-Jun-2008

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The New Zealand Commerce Commission cites a lack of duty-free choice at Auckland, where DFS opened one of the world's largest arrivals duty-free stores in April

The New Zealand Commerce Commission has revealed its reasons for blocking DFS Group’s attempt to acquire The Nuance Group’s Regency Duty Free operation at Auckland International airport and other airports in the country. The Commission announced its decision in March, at around the same time as the airport opened its new International arrivals areas, which includes the largest arrivals store in the Asia/Pacific region, operated by DFS.

Results published on the Commision’s website suggest it decided against the acquisition because duty-free consumers would no longer have a choice of retailers and be unable to compare prices between existing retailers at Auckland airport. The Commission also considered there was likely to be limited competition from high street duty-free retailers and duty-free retailers located at route-paired airports and was concerned that Auckland International airport Limited (AIAL) would have little reason to constrain the combined entity’s duty-free prices. It also felt that AIAL was unlikely to create an additional duty-free concession as it has a policy of having one duty-free concessionaire at the airport.

Commission chair Paula Rebstock said “the Commission was not satisfied that the proposed acquisition would not have, or would not be likely to have, the effect of substantially lessening competition in the market for the retail supply of duty-free goods at Auckland airport to international air travellers.”

Auckland airport is reviewing the Commission’s reasons for blocking the acquisition and any implications they may have for its decision to move to one duty-free shop operator at Auckland airport. It also pointed out that it has not breached the provisions of the Commerce Act and emphasised the benefits of moving from two duty-free operators to one. These include improved delivery of duty-free retail services and the ability to make the shopping area at the airport relative to other international airports.

DFS won the tender to be the single duty-free operator at the airport in July 2007, beating The Nuance Group, which had been at the airport for more than 20 years. DFS was awarded the licence to operate duty-free stores at the airport for seven years from April 2008, and revealed plans to invest over NZ$18m ($14m) into the redevelopment of duty-free shopping facilities and the airport forecasted concession revenues of NZ$17m ($12.6m).

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