Under the Commerce Act, the merger can be cleared only if the regulator is satisfied it is unlikely to lessen competition in any relevant market.
The three companies are one another’s closest rivals on the Kaituna River, one of New Zealand’s premier rafting destinations.
Their merger was proposed last November, as a way of battling rising Department of Conservation (DoC) concession fees and climate change pressures.
The proposal had the early backing of key stakeholders, including RotoruaNZ, Tourism Industry Aotearoa and Contiki NZ. The Backpacker Youth Adventure Tourism Association added its support in February.
The commission had previously issued another statement detailing its concerns, which Rafting JV Co – the proposed new combined entity – responded to in March.
The commission’s latest statement of issues said preliminary evidence suggested the rafting businesses competed directly on price, service quality and customer experience.
Whitewater rafting at Okere Falls near Rotorua. Photo / Christine Cornege
“The commission is not currently satisfied that the proposed joint venture would not substantially lessen competition,” the document, released on April 30, stated.
The commission noted significant barriers to entry for new operators in the market, including limited DoC concessions, capacity constraints on the Kaituna River and regulatory requirements.
It warned that the merged entity could gain market power, enabling higher prices or reduced service quality.
The commission questioned whether Rotorua rafting was a standalone market.
It said it was unclear whether the city’s other adventure tourism offerings would provide competition to constrain prices for a merged grade-five rafting operation.
While some were similar in price, they were often different in thrill level and duration.
Geography was also a factor, with the commission unconvinced rafting operators in Taupō or Queenstown would constrain competition, given limits on tourists switching locations.
Rotorua Rafting’s Sam Sutton told Local Democracy Reporting he was “not surprised” at the latest developments and said, in his opinion, the commission had “made [its] mind up from the start”.
He said he was “personally frustrated” at suggestions that the quality of the experience would decline.
“Not many businesses in Rotorua have 3000 five-star reviews each,” he said.
“If we were to drop the quality, then firstly, people would stop coming, and secondly, you’d have a very dangerous situation for those taking part.”
Rotorua Rafting’s Sam Sutton. Photo / Andrew Warner
He said he believed the commission should focus on big businesses like food retail and fuel providers, rather than on a potentially “short-sighted” decision that could restrict small businesses.
“Have they been to the gas station recently?” he said.
“In the current climate, when prices are going up on everything, it just feels like [the commission is] removed from the reality of the world. I’d like to see them worry about things that actually impact society.”
He said new DoC levies, which would amount to roughly 40% of the bottom line, would have a “huge impact” on the rafting businesses.
“It’ll be interesting to see how everybody goes when it’s time to pay that bill.”
Sutton said the parties involved in the merger had yet to discuss whether they will continue to pursue it, given the most recent statement from the commission.
Without it, he suggested things would continue as they currently were, and he expected the businesses to struggle with the emerging challenges.
A commission spokesperson said it was legally required to issue a statement of unresolved issues if it was not satisfied the information provided showed the acquisition would not substantially lessen competition.
“We have not reached a final view on the proposed acquisition,” the spokesperson said.
“Any suggestion otherwise is factually incorrect.”
Regarding investigation of fuel and supermarket retailers, the commission highlighted its action against two Auckland Pak’nSave stores, and an “ongoing” case against Mobil for alleged petrol price breaches.
The commission has called for further submissions on the Rotorua matter from interested parties by May 14, with cross-submissions due by May 25.
A final decision is expected by June 18, unless the timeline is extended.
Mathew Nash is a Local Democracy Reporting journalist based at the Rotorua Daily Post. He has previously written for SunLive, been a regular contributor to RNZ and was a football reporter in the UK for eight years.
– LDR is local body journalism co-funded by RNZ and NZ On Air.