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Judges divided on SX decision

A just-released written decision from the Court of Appeal shows that not all the judges agreed Southern Cross should be allowed to buy its main rival Aetna.

Wednesday, January 30th 2002, 1:25AM

The Court of Appeal ruling clearing Southern Cross’ controversial purchase of Aetna Health was not unanimous. One of the court’s three judges yesterday issued a dissenting opinion that backed the Commerce Commission’s original decision not to sanction the merger.

Appeal court judge Sir Kenneth Keith said he wasn’t persuaded the commission’s decision was wrong.

Late last year the Court of Appeal dismissed an appeal by the commission against an earlier High Court ruling. The High Court had overturned the commission’s original decision not to give Southern Cross a "clearance" to buy Aetna. The clearance would have provided an assurance the commission did not consider the merger anti-competitive.

The lack of a clearance did not prevent Southern Cross from going ahead with the purchase, which it did after re-applying to the commission and promising to sell part of Aetna.

In a written judgement, issued yesterday, Court of Appeal judges Sir Ivor Richardson and Justice Tipping outlined why they believed the case should be dismissed. But Sir Kenneth issued a dissenting opinion.

Sir Kenneth said the commission undertook extensive inquiries before making its decision. It had much more extensive information and technical expertise available to it than the Court of Appeal.

This information included estimates that Southern Cross’ post-acquisition market share would be 80% of the earned premium and 71% of lives covered.

The commission concluded that Southern Cross, the country’s largest health insurer, would eliminate its biggest competitor by buying Aetna, and this could raise competition issues.

New market share information presented to the court wasn’t reliable enough to justify overturning the commission’s decision, Sir Kenneth said.

This information showed a fall in Aetna’s market share, on a lives covered basis, and a rise in that of Southern Cross rival’s Sovereign and Tower. However, on an earned premium basis, the merged group’s market share was 78.5%, only slightly less than the commission’s estimate of 80%.

These small market share movements did not justify overturning the commission’s decision, he said.

« Rivals keen to attack Southern CrossSX boss Bowie resigns »

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