ISSN no. 1178-2560  
Project no. 11.03/PRJ0045385  
Public version  
Determination  
New Zealand Tegel Growers Association Incorporated [2022] NZCC 30  
The Commission:  
Sue Begg  
Dr Derek Johnston  
Vhari McWha  
Summary of application:  
The New Zealand Tegel Growers Association  
Incorporated has applied for authorisation, on behalf of  
its members, to collectively negotiate with Tegel Foods  
Limited.  
Determination:  
The Commerce Commission’s decision is to grant  
authorisation as it is satisfied that the proposed  
arrangements will in all the circumstances result, or be  
likely to result, in such a benefit to the public that the  
conduct should be permitted.  
Date of determination:  
2 August 2022  
Confidential material in this report has been removed. Its location in the document is  
denoted by [ ].  
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2
INTRODUCTION ..........................................................................................................................3  
DETERMINATION ........................................................................................................................3  
BACKGROUND ............................................................................................................................4  
ASSESSMENT PROCEDURE...........................................................................................................6  
PROPOSED ARRANGEMENT.........................................................................................................7  
HOW WE ASSESS AUTHORISATIONS DURING AN ‘EPIDEMIC PERIOD’ ...........................................8  
STATUTORY FRAMEWORK ............................................................................................................ 8  
Jurisdictional threshold........................................................................................................................ 8  
Public benefit test ................................................................................................................................ 9  
JURISDICTION .............................................................................................................................. 10  
Section 65AA Has the Commission received an application during the epidemic period?.............. 10  
Section 65AA Does the Proposed Arrangement contain a cartel provision? .................................. 11  
Section 58 Will the Proposed Arrangement lessen competition? ................................................... 11  
Authorisation of agreements with Tegel ........................................................................................... 12  
RELEVANT MARKETS .................................................................................................................13  
TGA’S SUBMISSIONS.................................................................................................................... 13  
OUR ASSESSMENT....................................................................................................................... 13  
WITH AND WITHOUT THE PROPOSED ARRANGEMENT...............................................................14  
THE SITUATION WITH THE PROPOSED ARRANGEMENT ............................................................. 14  
TGA’s submissions.............................................................................................................................. 14  
Tegel’s submissions............................................................................................................................ 15  
Our assessment.................................................................................................................................. 16  
THE SITUATION WITHOUT THE PROPOSED ARRANGEMENT...................................................... 19  
TGA’s submissions.............................................................................................................................. 19  
Tegel’s submissions............................................................................................................................ 19  
Our assessment.................................................................................................................................. 20  
OUR ASSESSMENT OF BENEFITS AND DETRIMENTS ....................................................................21  
GENERAL OBSERVATIONS ........................................................................................................... 21  
APPLYING THE PUBLIC BENEFIT TEST WHERE BENEFITS AND DETRIMENTS HAVE OCCURRED  
UNDER PROVISIONAL AUTHORISATION...................................................................................... 22  
POTENTIAL BENEFITS AND DETRIMENTS .................................................................................... 24  
AVOIDED TRANSACTIONS COSTS ................................................................................................ 25  
Submissions on [  
Our assessment of [  
] costs......................................................................................................... 25  
] costs.................................................................................................... 26  
Submissions on avoided ongoing transaction costs........................................................................... 27  
Our assessment of avoided ongoing transaction costs...................................................................... 31  
MORE EFFICIENT CONTRACT TERMS........................................................................................... 34  
Submissions on more efficient contract terms................................................................................... 35  
Our assessment of efficient contract terms ....................................................................................... 37  
POTENTIAL IMPACT ON THE BALANCE OF BARGAINING POWER............................................... 38  
Submissions on bargaining power imbalance.................................................................................... 39  
Our assessment on the imbalance of bargaining power ................................................................... 42  
EFFICIENCY IMPACTS OF INCREASED BARGAINING POWER FOR GROWERS.............................. 44  
Submissions on efficiency impacts..................................................................................................... 45  
Our assessment of efficiency impacts................................................................................................ 50  
WEALTH TRANSFERS ................................................................................................................... 55  
Submissions on wealth transfers ....................................................................................................... 56  
Our assessment of wealth transfers .................................................................................................. 57  
BALANCING OF BENEFITS AND DETRIMENTS.............................................................................. 58  
LENGTH OF THE PROPOSED AUTHORISATION ............................................................................60  
ATTACHMENT A: IMPACT OF HIGHER [  
] GROWER FEES.........................................................61  
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Introduction  
1.  
On 16 September 2021, the Commerce Commission (the Commission) received an  
application from New Zealand Tegel Growers Association (TGA) seeking  
authorisation on behalf of its members to collectively negotiate the terms and  
conditions of its members’ supply of chicken growing services to Tegel Foods Limited  
(Tegel) for a ten-year period (the Authorisation Application). As New Zealand is in an  
epidemic period, TGA applied under section 65AA(2) and (3), and in the alternative  
section 58(1) and (2) of the Commerce Act 1986 (the Act).1  
2.  
On 30 September 2021, TGA applied to the Commission seeking provisional  
authorisation for the same collective negotiations outlined above, under section  
65AD(2) of the Act, until the Commission declined or granted the Authorisation  
Application (the Provisional Authorisation). The Commission granted provisional  
authorisation on 19 November 2021 until the earlier of 25 March 2022 or the date  
determined by the operation of section 65AD(5) of the Act.2  
3.  
4.  
5.  
On 15 March 2022 TGA sought a further provisional authorisation on the same terms  
through to the conclusion of the Commission’s investigation in respect of the  
Authorisation Application. The Commission granted TGA a further provisional  
authorisation on 23 March 2022 until the date determined by the operation of  
section 65AD(5) of the Act (the Second Provisional Authorisation).3  
TGA proposes to collectively discuss and negotiate with Tegel about the terms of,  
adjustments to and reviews of, and resolution of disputes arising from, its chicken  
growing contracts and other associated issues. The proposed arrangement for which  
TGA seeks authorisation is described at paragraph 26 below (the Proposed  
Arrangement).  
On 13 April 2022 the Commission issued its draft determination to authorise the  
Proposed Arrangement for a period of ten years (Draft Determination).4  
Determination  
6.  
The Commission is satisfied that the Proposed Arrangement will in all the  
circumstances result, or be likely to result, in such a benefit to the public that it  
should be permitted.  
7.  
Our view is based on our assessment of the likely benefits and detriments on the  
evidence available to us.  
1
2
3
4
The statutory timeframe in which the Commission had to complete its investigation was extended twice  
by agreement with TGA to 3 August 2022.  
Provisional authorisation granted for New Zealand Tegel Growers Association to engage in collective  
bargaining with Tegel Foods.  
Continuation of provisional authorisation for New Zealand Tegel Growers Association to collectively  
negotiate with Tegel.  
Commission issues draft determination on TGA’s application to engage in collective bargaining with Tegel.  
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4
8.  
Accordingly, the Commission’s determination is to authorise the Proposed  
Arrangement for a period of ten years.  
Background  
9.  
TGA is an industry association. Its membership consists of three regional industry  
associations (Regional Associations) and individual chicken growers.5 As at the date  
of this Determination the Regional Associations represent [ ] growers in the greater  
Auckland, Taranaki, and Canterbury regions who supply chicken growing services to  
Tegel.  
10.  
11.  
Tegel is New Zealand’s largest poultry processor, which is wholly owned by Inoza  
Foods Incorporated, a privately-owned company registered in the Philippines.6  
Since its incorporation in 2006, TGA has collectively negotiated the terms of its  
members’ supply of chicken growing services with Tegel. Prior to this, each Regional  
Association negotiated with Tegel (or its predecessor) on behalf of its member  
growers.  
12.  
13.  
14.  
Over the years, TGA’s negotiations with Tegel resulted in various individual contracts  
between Tegel and TGA growers based on collectively agreed terms. The contracts  
which are currently in place between the parties are known as the ‘Farm  
Management Agreements’ (FMAs).  
The commercial dealings between Tegel and the growers  
[
].  
[
].  
15.  
16.  
[
].7  
[
]:  
5
Namely, the Auckland Meat Chicken Growers Association, the Taranaki Broiler Growers Associations and  
the Canterbury Poultry Meat Producers Association.  
Authorisation Application at [8.12].  
6
7
[
].  
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16.1 [  
16.2 [  
]; or  
].  
17.  
18.  
During the Provisional Authorisation and Second Provisional Authorisation periods  
the TGA growers negotiated collectively with Tegel to [  
terms of the FMAs.  
] and amend certain  
]:  
[
18.1 [  
18.2 [  
18.3 [  
];8, 9  
];  
];10 and  
18.4 [  
]:11  
[
]:  
(a)  
[
];  
(b)  
(c)  
[
[
]; and  
].  
19.  
20.  
[
].12  
[
].13  
8
9
Tegel submission on Draft Determination dated 20 May 2022 at [3.6].  
[
].  
10  
[
]; and Email from MinterEllisonRuddWatts to Commerce  
Commission dated 31 March 2022 at 12:22pm.  
Tegel’s submission on Draft Determination dated 20 May 2022 at [3.9].  
11  
12  
[
].  
13  
TGA’s cross-submission on the Draft Determination dated 15 June 2022 at [39] and [86].  
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Assessment procedure  
21.  
In making this Determination the Commission undertook a thorough investigation of  
the Proposed Arrangement.  
22.  
During the course of our investigation we consulted at various stages and to that end  
reviewed submissions and correspondence including:  
22.1 the Provisional Authorisation and Authorisation Application, as well as TGA’s  
cross-submissions dated 26 October 2021 and 23 December 2021;  
22.2 Van Den Brink Poultry Limited (Brinks)’s combined submission dated 7  
October 2021 on the Provisional Authorisation and Authorisation Application;  
22.3 Tegel’s submissions dated 12 October 2021 in response to the Provisional  
Authorisation and dated 5 November 2021 in response to the Authorisation  
Application;  
22.4 information received from TGA and Tegel about their negotiations pursuant  
to the provisional authorisations;  
22.5 Tegel’s submissions dated 20 May 2022 and 6 July 2022 in response to the  
Draft Determination;  
22.6 TGA’s cross-submissions in response to the Draft Determination dated 15 and  
27 June 2022;  
22.7 Tegel’s cross-submissions dated 5 and 6 July 2022 in response to the Draft  
Determination and TGA’s reply dated 27 July 2022; and  
22.8 a submission from a submitter the Commission granted anonymity to.  
23.  
24.  
Each of TGA and Tegel’s submissions were accompanied by expert economic reports.  
Tegel instructed the economic consultancy NERA and TGA instructed Castalia and  
Link Economics. We refer to their economic findings as those of Tegel and TGA  
respectively.  
We have also interviewed and received information from various interested parties  
during the stages of our authorisation process (eg, pursuant to voluntary requests  
for information and unsolicited submissions from affected parties (including Tegel  
and TGA).14  
25.  
Tegel and Brinks both opposed the Authorisation Application in their written  
submissions.  
14  
Public versions of TGA’s application documents, parties’ submissions and the Commission’s Statement of  
Preliminary Issues (SOPI) can be accessed on our case register.  
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Proposed Arrangement  
26.  
TGA seeks for itself, the Regional Associations, and the growers, together with future  
growers, authorisation to:  
26.1 collectively discuss and negotiate with Tegel:  
26.1.1 growing fees and other terms and conditions of chicken growing  
contracts;  
26.1.2 adjustment and review of growing fees and other matters arising from  
time to time under/or in relation to terms of chicken growing  
contracts; and  
26.1.3 resolution of disputes which from time to time arise under chicken  
growing contracts or otherwise arise between Tegel and a grower or  
growers;  
26.2 discuss amongst themselves matters relating to growers' discussions and  
negotiations with Tegel (whether collective or otherwise) on the matters  
referred to above;  
26.3 without limiting paragraph 26.2 above, exchange information between  
themselves concerning growers' discussions and negotiations with Tegel  
(whether collective or otherwise) on the matters referred to at paragraph  
26.1 above, including offers or proposed offers made or to be made to Tegel  
by or on behalf of a grower or growers, offers made by Tegel to a grower or  
growers, and acceptances or proposed acceptances by any party of any such  
offers;  
26.4 enter into agreements collectively negotiated between Tegel and TGA (or a  
Regional Association) and/or negotiated between Tegel and the growers  
containing common terms, relating to the matters described at paragraph  
26.1 above; and  
26.5 give effect to agreements collectively negotiated between Tegel and TGA (or  
a Regional Association) and/or negotiated between Tegel and the growers  
containing common terms, relating to the matters described at paragraph  
26.1 above, including provisions:  
26.5.1 setting growing fees;  
26.5.2 providing for the adjustment or review of growing fees; and  
26.5.3 providing for payments to be made by Tegel to growers, or by growers  
to Tegel in connection with the resolution of disputes between Tegel  
and a grower or growers.  
27.  
Together, the Commission refers to the above behaviour as the Proposed  
Arrangement.  
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28.  
29.  
TGA states that chicken growers may choose not to participate in collective  
negotiations and will be free to negotiate with Tegel individually, and as such have  
not previously engaged in a collective boycott.15  
The Commission is not authorising any persons to engage in a collective boycott. A  
collective boycott includes but is not limited to any collective refusal to supply, or  
acquire goods or services to or from any person.  
How we assess authorisations during an ‘epidemic period’  
Statutory framework  
30.  
A three-stage assessment is undertaken in any authorisation application under ss  
65AA and 58 of the Act: 16  
30.1 First, confirming:  
30.1.1 for s 58 applications, whether the applicant believes s 27 might apply  
to the agreement; or  
30.1.2 for s 65AA applications, whether the applicant believes the agreement  
may contain a cartel provision;17  
30.2 second, establishing whether the Commission has jurisdiction to authorise  
under s 61(6) (the ‘jurisdictional threshold’), and in addition, for s 65AA  
applications, whether the application has been made during the epidemic  
period;18  
30.3 third, assessing whether the associated benefits mean that authorisation  
should be granted (the ‘public benefit test’).  
31.  
The first stage of the assessment is generally assessed at the time the application is  
registered. We note TGA states at 2.13 of the Authorisation Application that it  
believes the Proposed Arrangement may contain a cartel provision or might breach  
s 27.  
Jurisdictional threshold  
32.  
The Commission has jurisdiction to grant an authorisation under s 58 only for  
arrangements that will, or are likely to, lessen competition. This is called the  
‘competition threshold’. The competition threshold arises from the s 61(6) test which  
requires a “lessening in competition that would result, or would be likely to result”  
from the arrangement.  
15  
TGA’s cross-submission dated 26 October 2021 sets out at [75]  
[
].  
16  
17  
18  
See generally our Authorisation Guidelines, December 2020 (Authorisation Guidelines).  
Sections 58(1) and (2) and ss 65AA(1) and (2).  
Noting that, in respect of section 65AA applications, s 61(6) is modified by s 65AB(3).  
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33.  
34.  
Usually, the Commission can only authorise cartel provisions to which s 27 would  
also apply, because s 58 does not make any express reference to cartel provisions.  
However, during the epidemic period, a person can also apply for authorisation  
under s 65AA of an arrangement containing a cartel provision.19  
For the purposes of s 65AA, s 61(6) and the competition threshold are replaced by s  
65AB(3) and (4). The Commission will have jurisdiction to grant authorisation under s  
65AA if the application is made during the epidemic period,20 and the Commission  
has reasonable grounds to believe the arrangement might contain a cartel provision.  
It is not necessary for the Commission to determine whether a provision is in fact a  
cartel provision.21  
Public benefit test  
35.  
Although the jurisdictional thresholds differ under ss 65AA and 58, the public benefit  
test is the same:22  
35.1 In relation to s 65AA, the Commission can authorise an arrangement that  
contains (or on reasonable grounds we believe might contain) a cartel  
provision if it is satisfied that the arrangement will in all the circumstances  
result, or be likely to result, in such a benefit to the public that it should be  
permitted.23  
35.2 In relation to s 58, the Commission can authorise an arrangement that may  
lessen competition if it is satisfied that the arrangement will be likely to result  
in a benefit to the public that would outweigh the lessening of competition.24  
36.  
37.  
While stated differently, there is no material difference between the two  
assessments of public benefit.25  
In each case the Commission needs to investigate the nature, likelihood and  
magnitude of any detriments and benefits that might arise from the proposed  
arrangement.26  
19  
Our process for determining s 65AA applications, and applications under s 58 made during the epidemic  
period, is explained in our Guidelines on Approach to Authorisations under the COVID-19 Response  
(Further Management Measures) Legislation Act (COVID-19 Guidelines).  
Sections 65AA(2) and (3).  
Section 65AB(4) of the Act.  
COVID-19 Guidelines at [36].  
Sections 65AB(3) and (4) of the Act.  
Section 61(6) of the Act.  
COVID-19 Guidelines at [38]. See also Air New Zealand and Qantas Airways Limited v Commerce  
Commission (2004) 11 TCLR 347 (HC) at [33] and Godfrey Hirst NZ Ltd v Commerce Commission (2011) 9  
NZBLC 103,396 (HC) at [88]-[90] where the two assessments of the public benefit test in relation to the  
authorisation of mergers and agreements generally were described as substantially the same.  
COVID-19 Guidelines at [38].  
20  
21  
22  
23  
24  
25  
26  
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38.  
The detriments and benefits must arise from the proposed arrangement for which  
authorisation is sought.27 To determine whether the detriments and benefits are  
specific to the proposed arrangement, we assess, in relation to a relevant market(s):  
38.1 what is likely to occur in the future without the arrangement (the  
counterfactual);  
38.2 what is likely to occur in the future with the arrangement (the factual); and  
38.3 once identified, we then assess all likely detriments and benefits relevant to  
our assessment of the arrangement.28  
39.  
As a general principle, detriments and benefits will be considered likely if there is a  
“real and substantial risk” or “real chance” that they will happen if the arrangement  
proceeds.29  
Jurisdiction  
Section 65AA Has the Commission received an application during the epidemic period?  
40.  
Section 65AA requires that the Commission receives an application during the  
epidemic period (and that the Commission believes on reasonable grounds the  
arrangement might contain a cartel provision). Given the application has been made  
during the epidemic period, the Commission considers that threshold has been met.  
41.  
However, Tegel submits that: It is self-evident from this history and context that the  
Authorisation Application does not relate to or support a response to COVID-19, and  
therefore authorisation cannot be granted under s 65AA(2) and (3).Tegel refers to  
its submissions in relation to the Provisional Authorisation in support.30  
42.  
43.  
For the reasons set out in our Draft Determination we do not consider it appropriate  
to read in’ any additional requirements to the plain wording of ss 65AA 65AD.31  
We note the Commerce Amendment Bill 2021 has passed into law as the Commerce  
Amendment Act 2022.32 Because the Commerce Amendment Act commenced in part  
before this determination, we have also considered whether our view should be  
different with the amendments to the Act effected by the Commerce Amendment  
Act 2022.  
44.  
Our view has not changed given:  
44.1 the amendment to s 65AA(1)(b), triggering its repeal at a time potentially  
earlier than s 65AE, would not occur until section 31 of the Commerce  
27  
28  
29  
30  
31  
32  
Authorisation Guidelines at [39].  
NZME Ltd v Commerce Commission [2018] 3 NZLR 715 (CA) at [83] and [86(a)].  
Ibid.  
Tegel Submission on the SOPI dated 5 November 2021 at [2.5] of section 2.  
See Draft Determination at [37].  
The Bill received Royal assent on 5 April 2022.  
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Amendment Act 2022 commences on the first anniversary of when Royal  
assent was given, being 5 April 2023;33  
44.2 the same amendments will not change the effect of Schedule 1AA, Part 3,  
subclause 12 of the Act in this case given they do not commence until 5  
October 2022. That, for the purposes of an application made during the  
epidemic period, ss 65AA AD continue to apply as if they remained in force  
despite their repeal; and  
44.3 while it is generally accepted enacted provisions can be taken into account  
when interpreting legislation,34 the general replacement of the ss 65AA AD  
powers, which are tied to the epidemic period, with similar powers not tied  
to the epidemic period, does not in itself give rise to any reason to change  
our interpretation of the s 65AA power above.  
Section 65AA Does the Proposed Arrangement contain a cartel provision?  
45.  
Any agreement between TGA, its members and Tegel will be a contract containing  
provisions.  
46.  
We consider there are reasonable grounds to believe that:  
46.1 as some of those provisions intend to set the price of chicken growing  
services; and  
46.2 but for any arrangement those services are supplied to Tegel by growers in  
competition with each other,  
those provisions might have the effect of fixing, controlling or maintaining price or  
restricting output. Therefore, there are reasonable grounds to believe that the  
Proposed Arrangement might contain a cartel provision.  
Section 58 Will the Proposed Arrangement lessen competition?  
47.  
With the Proposed Arrangement TGA submits it would seek to collectively negotiate  
the relevant fees and charges that TGA could agree with Tegel on behalf of its  
members. TGA also submits collective negotiation of non-price terms that are of  
competitive significance may also lessen competition.  
48.  
We consider that, when compared to individually negotiated supply contracts,  
collective bargaining would have the potential to raise the (quality adjusted) price  
paid by Tegel for chicken growing services and standardise non-price terms amongst  
the growers. Therefore, we agree with TGA that the Proposed Arrangement may  
lessen competition.35  
33  
Commerce Amendment Act 2022, s 2. The power to grant interim authorisations under s 65AAA  
commenced on 5 May 2022 (one month after the Bill received Royal assent) but as noted above this does  
not immediately trigger the repeal of s 65AA.  
34  
35  
Burrows and Carter Statute Law in New Zealand, 6th Edition, LexisNexis 2021 at [791 804].  
Authorisation Application at [2.20]. It is not necessary for any lessening to be substantial, see s (6A).  
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Authorisation of agreements with Tegel  
49.  
In addition to taking part in collective negotiations, the Proposed Arrangement  
(described at paragraph 26 above) would permit growers to enter into and give  
effect to agreements with Tegel that result from those negotiations.  
50.  
In part 2 of Tegel’s submission on the Draft Determination36 Tegel submits:  
The Commission cannot give a “blank cheque” authorisation for the applicant to enter into  
contracts that have not yet been negotiated or to give effect to provisions which have not yet  
been drafted.  
51.  
Rather, Tegel submits that any contract that results from authorised collective  
negotiations would need to be independently authorised.37 Tegel’s position is that  
the public benefit assessment cannot be carried out for a contract that does not yet  
exist.38  
52.  
53.  
The Commission disagrees.  
The Commission can authorise any contract, arrangement or understanding which it  
considers is likely to result in a benefit to the public.39 In this case, the Proposed  
Arrangement for which authorisation is sought envisages entering into and giving  
effect to contracts which do not exist yet, but which are to be collectively  
negotiated.  
54.  
55.  
The Act does not on a plain reading prevent the authorisation of an arrangement  
which includes entering into and giving effect to future contracts. The Commission  
does not believe it would be appropriate to read in such a limitation as it would limit  
the extent of potentially beneficial arrangements that can be authorised.  
Rather, it is the applicant who chooses for what authorisation is sought. The  
proposed arrangement may be specific or it may leave open the possibility of  
development and evolution. An arrangement which leaves open how it will develop  
in the future may create an obstacle for the applicant since the applicant bears a  
practical burden of persuasion over its merits.40 However, we do not see this as a  
limit on what may in principle be authorised.  
56.  
The authorisation of contracts that may result from collective bargaining is not new.  
The Proposed Arrangement includes entering into and giving effect to such contracts  
36  
37  
38  
39  
40  
Dated 20 May 2022.  
Tegel submission on the Draft Determination dated 20 May 2022 at [8.4] of Part 2.  
Ibid.  
Section 61(6) of the Act.  
See NZME Ltd v Commerce Commission [2018] 3 NZLR 715 (CA) at [86(b)]. We note uncertainty is not  
necessarily deleterious to the applicant - a contract, arrangement or understanding of broader discretion  
may give rise to greater potential benefits than one that is tightly constrained.  
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in similar terms to other collective negotiations that have been approved by the  
Commission and the ACCC.41  
57.  
While we cannot predict the specific future terms that may be agreed through  
collective negotiation between TGA and Tegel, we do not consider this to be a ‘blank  
cheque’. The Proposed Arrangement constrains the scope of authorisation to  
matters connected with growing chickens. While the potential specific provisions  
chicken growers and Tegel might enter into are numerous, these ultimately relate to  
commercially negotiated aspects regarding the price, quality, and volume of chicken  
growing services, which we have assessed.  
Relevant markets  
TGA’s submissions  
58.  
TGA submits that the relevant markets are:42  
58.1 Regional markets for broiler chicken growing services in each of the greater  
Auckland, Canterbury, and Taranaki regions. In support of its characterisation  
of the relevant markets, TGA cites animal welfare requirements for the  
transport of chickens,43 the Waikato Bay of Plenty Authorisation  
Determination,44 and the Tegel Foods Authorisation Determination45 in which  
the Commission has defined regional markets, and the specialised capital  
investment required to provide chicken growing services.  
58.2 One or more markets for the wholesale supply of primary and secondary  
processed chicken products. In support of this definition, TGA references the  
Commission’s conclusions in the Tegel Foods Authorisation Determination.  
Our assessment  
59.  
We consider that the relevant markets are the regional markets for both free-range  
and barn-raised chicken growing services in the greater Auckland, Canterbury, and  
Taranaki regions:  
59.1 Animal welfare requirements limit the distance a grower’s farm can be  
located from the processing plant it supplies. The Code of Welfare limits the  
transport of animals to “the shortest possible time”.46 The Society for the  
Prevention of Cruelty to Animals (SPCA) standards limit this duration so that  
"the time between the loading of the last bird, to the time of arrival at the  
41  
See Waikato-Bay of Plenty Chicken Growers Association Incorporated [2017] NZCC [37]; and Victorian  
Farmers Federation Authorisation Determination A91534 (16 June 2016); NZW Farmers’ Association  
Authorisation Determination A91417 (25 June 2014); Queensland Chicken Growers Association  
Incorporated Authorisation Determination A91347 (24 January 2013); and South Australian Inghams  
Chicken Growers Authorisation Determination A91294 (14 June 2012) for recent Australian examples.  
Tegel has not opposed these proposed relevant markets.  
42  
43  
44  
45  
46  
Code of Welfare: Transport within New Zealand at section [4.1].  
Waikato-Bay of Plenty Chicken Growers Association Incorporated [2017] NZCC [37].  
See Tegel Foods Limited and Brinks Group of Companies (Commerce Commission Decision 658, 2008).  
Code of Welfare: Transport within New Zealand at section [4.1].  
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14  
final destination, must be less than two hours.47 Supplementing TGA’s  
submissions on this point, the Commission heard at interview that the  
duration of travel limits growersability to supply a processor located in  
another region.48  
59.2 The locations of farms currently supplying Tegel confirm that growers are  
located within a two-hour radius of Tegel’s processing facilities.49  
59.3 In the Waikato - Bay of Plenty Authorisation Determination, the Commission  
determined that specialised shedding and equipment for chicken growing  
services places it in a discrete market from other forms of farming.50 The  
Determination further identified that growing free-range and barn-raised  
chickens are suitably similar to be included in the same market. This view was  
supported by a chicken processor who indicated that there are not large  
barriers to growers who wish to switch from barn-raised to free-range.51  
60.  
The Commission further considers that there are downstream markets for the  
wholesale supply of chicken products. Our view is that there are likely to be separate  
product markets for the wholesale supply of primary and secondary processed  
chicken.52, 53 There may also be separate geographic markets for the North and South  
Islands in relation to primary processed chicken because of the cost and potential  
delays associated with transporting these products across the Cook Strait. As a  
precise definition of the relevant downstream markets is not required for our  
analysis, we have not sought to define these.  
With and without the Proposed Arrangement  
61.  
In reaching our view below we have considered all submissions and evidence  
received on the likely situations that would arise with and without authorisation  
being granted for the Proposed Arrangement.  
The situation with the Proposed Arrangement  
TGA’s submissions  
62.  
TGA submits that if the Commission grants authorisation it would engage in the  
Proposed Arrangement ie, it would engage in collective negotiations with Tegel as  
submitted.  
47  
48  
49  
50  
51  
52  
SPCA Certified Standards for Free Range Meat Chickens (version 1.1 2021) at [E64].  
Commerce Commission interview with Inghams (29 November 2021).  
See Appendix H of the Authorisation Application.  
See Waikato-Bay of Plenty Chicken Growers Association Incorporated [2017] NZCC [37] at [35.4].  
Commerce Commission interview with Inghams (29 November 2021).  
Primary processed chicken might include both whole birds and basic cuts (eg, breast, thigh, drumstick).  
Secondary processed chicken might include value-added products (eg, nuggets, burgers, skewers).  
This is consistent with a previous Commission Determination in which there was little supply-side or  
demand-side substitution between primary and secondary processed chicken. See Tegel Foods Limited  
and Brinks Group of Companies (Commerce Commission Decision 658, 2008) at [84].  
53  
4461240  
     
15  
63.  
64.  
TGA further submits that if Tegel chooses not to negotiate with TGA, the growers  
would discuss their positions as a collective before negotiating individually with  
Tegel.54 In that way, TGA says, many of the benefits of the Proposed Arrangement  
(or similar benefits) are likely even if Tegel negotiates with growers individually.55  
TGA refers to these two scenarios in the situation with the Proposed Arrangement as  
Factual 1 and Factual 2 respectively.56  
64.1 According to TGA the FMAs would largely remain in place under Factual 1,  
and it speculates that some payment terms and terms unclear in their  
application are likely to be amended or removed  
[
].57  
64.2 Under Factual 2, TGA anticipates similar outcomes to Factual 1.58  
65.  
66.  
For the purpose of TGA’s analysis of the Proposed Arrangement’s likely benefits and  
detriments in the scenario where the Commission approves the Authorisation  
Application, TGA adopts Factual 1.  
[
].59 [  
].61  
Tegel’s submissions  
].60  
[
67.  
Tegel disputes TGA’s submitted Factual 1 and Factual 2.  
68.  
In October 2021 – shortly after the Commission registered TGA’s Authorisation  
Application –  
[
].62  
68.1 [  
].63  
68.2 [  
].64  
54  
55  
56  
57  
Authorisation Application at [1.25] and [8.3(g)].  
Ibid.  
Appendix D of the Authorisation Application at [3.4.1].  
Ibid. In its submission on the Draft Determination dated 15 June 2022 TGA describes some of the  
interpretational difficulties surrounding the [  
Appendix D of the Authorisation Application at [3.4.1].  
TGA’s cross-submission dated 23 December 2021 at [33].  
Ibid.  
] from its perspective at [36].  
58  
59  
60  
61  
62  
63  
64  
Ibid at [35].  
Tegel’ submission in response to TGA’s Provisional Authorisation dated 12 October 2021 at [4.1].  
Ibid at [7.6].  
Tegel’s submission in response to the SOPI dated 5 November 2021 at [6.5].  
4461240  
 
16  
69.  
70.  
Tegel’s submissions regarding the situation with the Proposed Arrangement are not,  
however, limited to [  
According to Tegel:  
70.1 [  
]. It submits more broadly on the FMAs [  
].  
]; and  
70.2 as far as [  
] are concerned, it would continue to consult with  
TGA (which, it submits, falls within the scope of a collaborative activity’  
between Tegel and the growers).65, 66, 67  
71.  
[
].68  
Our assessment  
72.  
We consider it is likely negotiations seeking  
[
],69 and  
ultimately variations to the FMAs,70 would continue on a collective basis with the  
Proposed Arrangement ie, TGA’s submitted Factual 1.71  
73.  
74.  
We also consider such negotiations are likely to result in an agreement, although the  
precise terms of any resulting agreement are unclear to us on the available evidence.  
First, evidence preceding and following the Commission’s grant of provisional  
authorisation is not consistent with Tegel’s submissions. Tegel has historically and  
more recently collectively negotiated with TGA despite its various submissions.  
74.1 We note in one of its submissions on the Provisional Authorisation Tegel said  
[
].72  
65  
66  
67  
Ibid at [6.5] to [6.7].  
Tegel’s submission in response to TGA’s Provisional Authorisation dated 30 September 2021 at [5.9].  
We do not express any view on the existence or otherwise of a collaborative activity between Tegel and  
the growers in this Determination.  
68  
69  
[
].  
[
].  
70  
71  
Or to facilitate the conclusion of new agreements largely reflecting the current terms of the FMAs.  
In addition to our finding on the likely factual, we note that there is authority for the position that, where  
authorisation is sought to collectively negotiate, it should be assumed that the party to be negotiated  
with will participate: see Application by Port of Newcastle Operations Pty Limited (No 2) [2022] ACompT 1  
at [43]-[52]. This is because collective negotiation, involving participation by the relevant counterparty, is  
the conduct for which authorisation is sought.  
72  
Tegel’s submission in response to TGA’s Provisional Authorisation dated 30 September 2021 at [2.16].  
4461240  
 
17  
74.2 During collective [  
] negotiations with TGA after the Commission’s grant  
of the Provisional Authorisation and prior to the Second Provisional  
Authorisation:  
74.2.1 [  
].73  
74.2.2 Tegel participated in [  
] collective negotiations with TGA.  
].  
75.  
76.  
Second, as discussed above, Tegel and the TGA  
[
Lastly, we remain of the view expressed in the Provisional Authorisation that the  
parties are likely to enter into an agreement given:  
76.1 The parties are in a symbiotic relationship’: the growers are vested in Tegel’s  
financial wellbeing and vice versa.  
[
].  
76.2 [  
[
],74  
].75  
76.3 the FMAs play an important role in the parties’ operations, such that when  
there is uncertainty (or a dispute) the operation of the partiesbusinesses is  
affected. It is in the long-term interest of all the parties that their businesses  
operate smoothly.  
76.4 And in relation to Tegel and TGA’s ongoing negotiations  
[
], we note parties have an incentive to reach an  
agreement in a manner that best limits their exposure to costs.  
77.  
We also assessed TGA’s Factual 2. In our view Factual 2 is not a likely situation with  
the Proposed Arrangement.  
73  
74  
75  
Letter from Lane Neave to MinterEllisonRuddWatts dated 25 November 2021 at [1].  
Discussed below in our assessment of the likely benefits and detriments of the Proposed Arrangement.  
We note, by way of example, the following remarks made by Tegel at interview (Commerce Commission  
interview with Tegel (7 December 2021)):  
[
].  
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18  
78.  
Given the evidence before us we consider the probability that Tegel would not  
participate in collective negotiations for the duration of the period authorisation is  
granted is so low that we can exclude the real chance that Tegel would not do so.  
78.1 Following provisional authorisation the parties collectively negotiated as  
contemplated by Factual 1; [  
].  
78.2 We consider the reasons given above establishing the real chance of Tegel  
engaging in collective negotiations in fact support a much higher probability  
that Tegel would continue to collectively negotiate.  
78.3 We believe Tegel’s incentives to engage in collective negotiations with TGA  
are not likely to change during the period for which authorisation is granted.  
78.3.1 As mentioned in paragraph 76, Tegel and the growers share a  
mutually beneficial relationship in which the parties are financially  
incentivised to cooperate in their commercial dealings. This is not  
likely to change with the Proposed Arrangement during the period of  
authorisation.  
78.3.2 Based on the nature of the partiesrelationship, and the terms of the  
FMAs that are seemingly in need of amendment now and potentially  
in future to respond to new regulation, we assess the parties’ financial  
incentives mean we can exclude the real chance that Tegel would not  
engage in collective negotiations during the period of authorisation.76  
78.3.3 Our reasoning is informed by [  
]. As set  
out at paragraph 18,  
[
].  
78.3.4 It is instructive that Tegel has advised TGA [  
] that:  
(a)  
(b)  
[
[
]; and  
].77  
79.  
For these reasons we do not believe Factual 2 is a likely situation with the Proposed  
Arrangement.  
76  
77  
Which would otherwise risk the smooth operation of the parties’ businesses and increase their exposure  
to transaction costs.  
At [4] of Annex 3 of Tegel’s submission on the Draft Determination dated 6 July 2022.  
4461240  
19  
The situation without the Proposed Arrangement  
TGA’s submissions  
80.  
TGA submits the FMAs are complex [  
] contracts that necessitate ongoing  
negotiations between Tegel and the growers regarding the suitability of the terms of  
these contracts.78 Such negotiations have, TGA notes, in the past resulted in  
amendments to the FMAs.79  
81.  
82.  
Because of the complexity [  
authorisation, [  
] of the FMAs, TGA considers that absent  
].80  
Other factors according to TGA that might necessitate changes to the FMAs include  
changes to:  
82.1 economic and trading conditions;  
82.2 customer preferences or requirements;  
82.3 Tegel’s shed standards; and  
82.4 animal welfare requirements,  
all of which would, in TGA’s submission, be costly through individual negotiations.81  
83.  
84.  
As a result, TGA says simpler, [  
] contracts would result without the Proposed  
Arrangement.82  
Therefore, as regards the likely situation without the Proposed Arrangement, TGA  
submits:  
84.1 the FMAs are unlikely to continue beyond the short to medium term  
[
]; and  
84.2 the FMAs are likely to be replaced by simpler, [  
] contracts that are  
negotiated with each grower based on a standard short form template.83  
Tegel’s submissions  
85.  
Tegel disputes the situation TGA considers likely without the Proposed Arrangement.  
78  
79  
80  
Authorisation Application at [5.1].  
Ibid at [5.6].  
Ibid at [5.11]. In its submission on the Draft Determination dated 15 June 2022 TGA notes at [38] many of  
the issues related to [  
] are likely to arise again [  
].  
[
].  
81  
82  
Ibid at [5.8].  
The Commission understands this to mean contracts that are less nuanced and less efficient compared to  
Factual 1.  
83  
TGA’s cross-submission dated 23 December 2021 at [41].  
4461240  
     
20  
86.  
Tegel submits that without the Proposed Arrangement the FMAs would continue in  
force in accordance with their terms until expiry, unless a grower agrees to a  
variation.84  
86.1 Tegel submits further, if a grower agrees to vary its FMA the variation would  
be individually negotiated.85  
86.2 Tegel considers such variations unlikely, however, for two reasons.86 First,  
Tegel has no ability to compel the growers to agree to variations of the FMAs.  
And second, the growers generally have no incentive to [  
].  
87.  
88.  
Therefore, Tegel submits, growers are likely to negotiate on an individual basis as an  
alternative to the Proposed Arrangement, but only to the extent that renegotiations  
are required.87  
Tegel notes such individual negotiations are  
[
].88  
Our assessment  
89.  
Without the Proposed Arrangement the growers and Tegel would have no choice but  
to negotiate individually. By adhering to the FMAs without authorisation the parties  
would continue to give effect to provisions that may fix the price of chicken growing  
services to Tegel. Such provisions in the FMAs would be unenforceable under s 30C  
of the Act.  
90.  
As the nature of the contracts in the counterfactual has some bearing on the  
benefits and detriments of the Proposed Arrangement, we consider the following  
scenarios are likely:  
90.1 In the short term, we agree with Tegel’s submissions that the contracts are  
likely to closely reflect the existing FMAs, albeit with minor but important  
variations [  
[
].89 This is supported by  
] practical considerations given the  
contractual uncertainty which would result if authorisation is declined.  
84  
85  
86  
87  
88  
89  
Tegel submission in response to the SOPI dated 5 November 2021 at [7.4].  
Ibid.  
Ibid at [7.7] and [7.13].  
Report by NERA dated 5 November 2021 at [8].  
Tegel’s submission in response to the SOPI dated 5 November 2021 at [7.8].  
[
]; see Tegel’s submission in response to the SOPI dated 8 October 2021 at Appendix 1 Variation  
of Agreement.  
[
]; see Commerce Commission Interview with [  
].  
4461240  
 
21  
90.2 However, in the long term, we consider it most likely that these contracts  
would become increasingly divergent variations on the existing FMAs.  
Nevertheless, it is also likely that they are replaced by standard form, less  
efficient contracts as submitted by TGA, depending on the respective  
bargaining position of the parties in the future.  
Our assessment of benefits and detriments  
General observations  
91.  
The Commission will grant authorisation if it is satisfied, on the evidence before it,  
that the proposed conduct will result, or will be likely to result, in a benefit to the  
public that would outweigh the lessening in competition and/or effect of any cartel  
provision.90 In making this assessment, the Commission considers the quality of the  
evidence and makes judgements about how much weight to give to the evidence.  
92.  
93.  
In Godfrey Hirst, the Court of Appeal observed that the Commission must consider a  
broad range of benefits and detriments in applications for authorisation. This may  
include efficiencies and non-economic factors.91  
In particular, the Court of Appeal indicated that the Commission must have regard to  
efficiencies when weighed together with long-term benefits to consumers, the  
promotion of competition, and any economic and non-economic public benefits. The  
Court stated that “[w]here possible these elements should be quantified; but the  
Commission and the courts cannot be compelled to perform quantitative analysis of  
qualitative variables.”92  
94.  
95.  
The Commission’s approach is to quantify benefits and detriments to the extent that  
it is practicable to do so.93 Regarding the weight that can be given to qualitative  
factors, the Court of Appeal said in Godfrey Hirst that “[q]ualitative factors can be  
given independent and, where appropriate, decisive weight”.94  
The Court of Appeal in NZME confirmed that the Act allows the Commission to apply  
a ‘modified total welfare’ approach but does not require us to do so. A modified total  
welfare approach can take into account the distributional effects of benefits and  
detriments within a community. In this case, no party has proposed to depart from  
the total welfare approach and the Commission does not propose to do so of its own  
motion given that it does not appear that it would affect our decision to grant  
authorisation.95  
90  
91  
92  
93  
Authorisation Guidelines at [14.2]; and Covid-19 Guidelines at [36.1].  
Godfrey Hirst NZ Ltd v Commerce Commission [2016] NZCA 560 (CA) at [24] and [31] (Godfrey Hirst).  
Godfrey Hirst at [36].  
Telecom Corporation of New Zealand Ltd v Commerce Commission [1992] 3 NZLR 429 (CA) (AMPS-A CA) at  
447; Air New Zealand at [319]; and Ravensdown Corporation Ltd v Commerce Commission High Court,  
Wellington API68/96 (16 December 1996) at [47] to [48].  
94  
95  
Godfrey Hirst at [38].  
NZME Ltd v Commerce Commission [2018] 3 NZLR 715 (CA) at [75]; and see Authorisation Guidelines at  
[84].  
4461240  
   
22  
96.  
In general, collective bargaining has the potential to cause both public benefits and  
detriments. Collective bargaining can reduce the costs of negotiating contracts by  
reducing the number of negotiations and by allowing advisory costs to be shared.96  
Collective bargaining may also enable access to higher quality advice through the  
pooling of member’s resources. It can also change incentives to obtain mutually  
beneficial gains from trade by allowing information to be shared and by rebalancing  
bargaining power. Consequently, collectively negotiated contracts may be more  
efficient in the sense that they are more nuanced and take account of more  
contingencies than might be the case if negotiated individually.  
97.  
Detriments arise if a market experiences a loss in allocative, productive or dynamic  
efficiency, in this case within the relevant regional markets for chicken growing  
services.  
97.1 Allocative efficiency is lost when inefficient (higher) prices result in less  
preferred alternatives for consumers or to the purchase of smaller quantities  
by consumers.  
97.2 Productive efficiency is lost when resources are inefficiently employed in  
production, typically increasing costs above efficient levels. Consequently,  
costs or unit costs may increase, and capacity may be sub-optimally used.  
97.3 Dynamic efficiency is typically lost when the incentive or the ability to  
innovate/invest is reduced.  
Applying the public benefit test where benefits and detriments have occurred under  
provisional authorisation  
98.  
In the course of assessing TGA’s application to authorise the Proposed Arrangement,  
the Commission determined that the Proposed Arrangement should be provisionally  
authorised under section 65AD(2). This is reflected in the Provisional Authorisation  
dated 19 November 2021 and the Second Provisional Authorisation dated 23 March  
2022.  
99.  
As a result, the parties have already engaged in collective bargaining under the  
Proposed Arrangement. That activity has realised some of the potential benefits we  
identified were likely to occur when provisional authorisation was granted.  
[
].  
100. Tegel has submitted that benefits arising under provisional authorisation before this  
final determination must be discarded:97  
[
]. As the  
Commission rightly observes, benefits of collective bargaining prior to authorisation being  
granted cannot be counted as a benefit of the authorisation.  
96  
97  
Stephen King (2013) Collective Bargaining by Business: Economic and Legal Implications. UNSW Law  
Journal, 36(1), [107] [138].  
Tegel’s submission on the Draft Determination dated 20 May 2022 at [6.2].  
4461240  
 
23  
101. We understand Tegel’s position to be that in the final balancing exercise for a full  
authorisation, the Commission can only consider future benefits and detriments.  
Accordingly, where a provisional authorisation brings forward the benefits of the  
arrangement (or realises benefits that would otherwise be unavailable), then those  
benefits should not be counted when considering the final determination.  
102. The Commission disagrees.  
103. In making its final determination for a full authorisation, the Commission is directed  
by section 61(6) to consider whether the conduct to which the authorisation  
application relates will in all the circumstances result, or be likely to result, in such a  
benefit to the public that it should be permitted despite the contravention (or  
potential contravention) of the Act.98  
104. In the present case, we consider that the benefits of collective bargaining during the  
period of provisional authorisation [  
] were  
clearly related to the conduct for which authorisation was sought and should be  
included in our assessment even though they are in the past and will not be affected  
by our final determination.  
105. Provisional authorisation (or interim authorisation under s 65AAA) allows the  
participants to realise some of the potential benefits of authorisation while the  
Commission considers the matter fully.99 It also assists the Commission to determine  
the full authorisation, in light of what has occurred during the provisional  
authorisation.  
106. We are concerned that Tegel’s approach might disincentivise parties from entering  
into, or giving effect to, provisionally authorised conduct out of concern that the  
benefits arising from that conduct would not be counted and full authorisation not  
granted as a result. We consider that this would be inconsistent with the statutory  
purpose of provisional authorisation which is to allow those benefits to the public to  
be realised at any early stage.  
107. We consider that our approach is consistent with our usual application of the factual  
and counterfactual. Our Authorisation Guidelines follow the test laid down by the  
High Court in Godfrey Hirst NZ Ltd v Commerce Commission (No. 1) (notwithstanding  
that case concerned an acquisition of a business, not an authorisation of an  
arrangement):100  
98  
See also section 65AB(3).  
Section 65AD(2).  
99  
100  
Godfrey Hirst NZ Ltd v Commerce Commission (2011) 9 NZBLC 103,396 (HC) at [119]. In its reasoning, the  
High Court in Godfrey Hirst (No. 1) cited Areeda and Hovenkamp (emphasis of the Court): “An efficiency is  
said to be ‘merger specific’ if it is a unique consequence of the merger that is, if it could not readily be  
attained by other means or if the social cost of attaining it by other means is at least as high as the social  
cost of the merger. As a general proposition, the efficiency defence requires a showing that claimed  
efficiencies are ‘merger specific’.” The Court went on to say: “We agree that there is a need to consider  
only merger-specific efficiencies. A proper assessment of the factual as against the counterfactual should  
be doing just that…”. See also NZME Ltd v Commerce Commission [2018] 3 NZLR 715 (CA) at [86(d)].  
4461240  
24  
It is well understood that any claimed public benefits must be causally connected to the  
proposed acquisition. That is to say, an applicant claiming public benefits (usually efficiencies)  
must show that they are public benefits that are likely to arise from the proposed acquisition  
(the factual) and that they would not be likely to occur if the acquisition does not proceed  
(the counterfactual)…  
108. In our view, a proper assessment of the factual against the counterfactual where  
benefits and detriments have arisen following provisional authorisation does not  
exclude the counting of those benefits or detriments in the final balancing exercise  
for full authorisation. This is because the proper assessment of the factual against  
the counterfactual, as emphasised in Godfrey Hirst, focusses on what is likely with or  
without the proposed arrangement. In this case the assessment of the Proposed  
Arrangement occurs from the first Provisional Authorisation as that is when the  
conduct to which the authorisation application relates began.  
Potential benefits and detriments  
109. We have considered four main categories of potential benefits and detriments from  
the Proposed Arrangement:  
109.1 potential benefits (or detriments) from reductions (or increases) in the  
transaction costs incurred in negotiations between Tegel and the growers;  
109.2 potential benefits from the development of more efficient contract terms;  
109.3 potential benefits and detriments from impacts on allocative, productive and  
dynamic efficiency. Various beneficial and/or detrimental impacts on  
efficiency may arise from the Proposed Arrangement to the extent that it  
would likely lessen competition between growers, consequently improving  
their bargaining position with Tegel.101 The potential efficiency impacts from  
such a change in the balance of bargaining power include:  
109.3.1  
productive and/or dynamic efficiency benefits from the more  
effective resolution of potential hold-up problems that might  
otherwise deter efficient investment by the growers;102  
109.3.2 allocative efficiency detriments arising from higher grower  
fees;  
101  
102  
Because this range of efficiency impacts could arise from an increase in growers’ bargaining power,  
brought about by the Proposed Arrangement and the likely subsequent lessening of competition amongst  
growers, we have considered these potential impacts in a single section rather than in separate benefit  
and detriment sections.  
The hold-up problem arises when one party is required to make a sunk, relationship-specific investment  
and in the process of bargaining with another party, that other party can appropriate some of the gains  
from the sunk investment. Consequently, investment incentives may be distorted toward making too  
little investment or towards investments that are less subject to appropriation. See Katz, M. & Hermalin,  
B. (2009). Information and the hold-up problem. The RAND Journal of Economics. 40(3) 405-423.  
4461240  
 
25  
109.3.3  
other productive and dynamic efficiency detriments that could  
arise from any lessening of competition between the growers  
resulting from the Proposed Arrangement; and  
109.4 potential benefits from any wealth transfers from Tegel’s foreign  
shareholders to domestic growers which could arise from higher grower fees.  
110. Our overall assessment of this range of likely benefits and detriments is that the  
Proposed Arrangement is more likely than not to generate a net public benefit such  
that it should be authorised.  
Avoided transactions costs  
111. We have further categorised potential transaction cost savings into two categories:  
111.1 avoided costs [  
], likely realised in the short term;  
111.2 avoided costs associated with ongoing negotiations, likely realised over the  
long term.  
Submissions on [  
] costs  
112. TGA submitted that enabling collective bargaining has reduced the cost and timing of  
[
[
]. TGA’s view is  
]:103  
112.1 [  
112.2 [  
];104 and  
].  
].105  
].106  
113. [  
[
114. [  
].107  
103  
Provisional Authorisation at [4.19] to [4.20].  
Commerce Commission interview with TGA (15 December 2021); and Commerce Commission interview  
104  
with [  
[
].  
105  
106  
107  
]. Provisional Authorisation Application at [4.26 (a)].  
Provisional Authorisation at [4.7].  
Tegel’s Submission in response to the SOPI dated 5 November 2021 at [5.3] to [5.7]; Commerce  
Commission interview with Tegel (7 December 2021); and NERA Review of Draft Determination in  
respect of NZTGA authorisation Application (20 May 2022) at [38].  
4461240  
   
26  
115. [  
].108  
116. Tegel had further claimed that a collectively negotiated contract does not provide for  
the unique needs and circumstances of individual growers,  
[
].109  
117. [  
].  
Our assessment of [  
] costs  
118. As outlined above we consider that any benefits relating to [  
]
provisional authorisation should be included in our analysis, notwithstanding the fact  
that these have arisen prior to our determination to grant full authorisation.  
119. Absent authorisation we consider that Tegel would have likely continued in its  
attempts to [  
] by engaging in negotiations with growers on an individual  
basis.110 [  
[
],111  
].112  
120. [  
].113  
121. [  
].  
122. We consider that if Tegel continued to engage with most, if not all, TGA members  
[
] in the counterfactual, Tegel may have been able to reach  
] agreements with at least some of these growers. If negotiations  
individual [  
would have related only to the amendment of a few key terms,  
[
], then the short-term transactions  
] in the counterfactual may not necessarily be large.  
costs [  
123. However, we consider it is more likely that attempts to individually negotiate with  
most TGA growers [ ] in the counterfactual could have been time-  
consuming and ultimately unsuccessful,  
[
]. In this scenario, Tegel  
108  
109  
Commerce Commission interview with Tegel (7 December 2021).  
NERA Submission on NZTGA SOPI (5 November 2021) at [19]; and Tegel’s Submission in response to the  
SOPI dated 5 November 2021 at [10.5].  
110  
111  
[
] Commerce Commission interview with Tegel (7 December 2021).  
[
].  
112  
113  
[
].  
Commerce Commission interview with Tegel (7 December 2021).  
4461240  
 
27  
negotiating individually with all growers would likely have made it more difficult and  
costly to arrive at a satisfactory outcome for all parties.  
124. As a result, we consider that it is likely that collective bargaining as provisionally  
authorised has led to a material saving in [  
] costs.  
[
].  
125. We consider that there is a real chance that without collective bargaining  
]. Consequently, our view is that provisionally authorising  
the Proposed Arrangement has eliminated the real risk of substantial [ ] costs  
being incurred by both parties, generating a material transaction cost saving. We  
[
estimate that this benefit is potentially in the order of $[  
].114  
Submissions on avoided ongoing transaction costs  
126. TGA submits that, in addition to short term cost savings [  
], collective  
bargaining pursuant to the Proposed Arrangement would result in ongoing  
transaction cost savings in the range of $1.4 million to $3.1 million over the ten-year  
period for which authorisation is sought.115 Such cost savings, TGA submits, would  
arise because collective negotiations with Tegel are less costly than the sum of costs  
associated with Tegel negotiating with each individual grower.  
127. While TGA does not consider Tegel’s submitted counterfactual to be likely (that the  
FMAs would continue in their current form), they provided a further transaction cost  
saving analysis considering Tegel’s submitted counterfactual. To this end TGA  
estimates that the transaction costs savings under the Proposed Arrangement would  
be in the range of $1 million to $1.5 million over the ten-year period. 116  
128. In its submission TGA stresses that transaction cost savings can be obtained due to  
the extent of commonality among growers. While growers differ with respect to  
[
], the FMAs cover many  
factors that do not vary between growers.117  
129. This includes the parties’ rights and obligations generally under the FMAs,  
[
].118 These terms are the same across growers, and so transaction cost  
savings can be obtained by discussing them collectively.  
114  
This figure is estimated as the cost [  
negotiation costs [ ]. [  
of the total cost per grower under collective bargaining [  
], as calculated by TGA, minus Tegel’s estimation of  
] minus [ ]. The latter figure is calculated as Tegel’s estimation  
] multiplied by [ ] farms. See [3.1.3] of  
Castalia Public Benefits and Detriments of a Provisional Authorisation for Collective Bargaining; and  
Appendix B of NERA Review of Draft Determination in Respect of NZTGA authorisation Application (20  
May 2022).  
Appendix D of the Authorisation Application at [3.5.1]; and Authorisation Application at [8.6].  
TGA’s cross-submission dated 23 December 2021 at [40] to [42] and at Schedule 2.  
Ibid at [13] and [16].  
115  
116  
117  
118  
Ibid at [17] to [18].  
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28  
130. While uncertainty exists when estimating transaction costs over a 10-year period,  
TGA’s view is that the economies of scale of negotiating once, rather than with  
approximately [ ] individual growers, means there are significant transaction cost  
savings to be gained from granting authorisation for the Proposed Arrangement.119  
131. TGA further points to the Waikato Bay of Plenty Authorisation,120 which involved  
Inghams Enterprises (NZ) Pty Limited (Inghams), and several chicken grower related  
authorisations in Australia.  
132. Regarding the former, TGA submits the fact that Inghams is collectively negotiating  
with its growers post-authorisation is evidence of transaction cost savings existing  
regardless of similar variation in grower characteristics.121 With respect to the latter,  
TGA submits that the ACCC has consistently accepted claims of transaction cost  
savings for chicken grower authorisations even though greater heterogeneity exists  
among Australian growers.122 The authorisation, and subsequent engagement in,  
collective bargaining by chicken growers is commonplace in Australia.  
133. At interviews, some TGA members claimed that negotiations with Tegel with TGA’s  
assistance have been a quick process.123 These growers submit that there is rarely  
disagreement among growers and that matters generally gain near full support at  
association meetings. These TGA growers also claim that authorisation would allow  
them to share the costs of negotiating with Tegel.124 Absent authorisation, growers  
would pay advisory costs (largely legal and accounting costs) individually.  
134. In contrast, Tegel submitted that transaction cost savings are at least overstated,125  
and in fact, based on recent negotiations, Tegel considers that collective bargaining  
would result in a transaction cost detriment.126 This is because Tegel disputes TGA’s  
factual and counterfactual assumptions. Tegel claims that the growers have no  
incentive [  
[
].127  
].128 This position is supported by a grower who individually negotiated with Tegel,  
].129  
[
119  
Link Economics – Comments on submissions on the Commerce Commission’s Draft Determination (15  
June 2022) at [33].  
Waikato-Bay of Plenty Chicken Growers Association Incorporated [2017] NZCC [37].  
TGA’s cross-submission dated 23 December 2021 at [19].  
Ibid at [20] to [24].  
120  
121  
122  
123  
Commerce Commission interview with [  
]; and Commerce Commission  
interview with [  
Commerce Commission interview with [  
with [  
].  
124  
]; Commerce Commission interview  
]; and Commerce Commission interview with  
[
].  
125  
126  
Tegel’s submission in response to the SOPI dated 5 November 2021 at [10.2].  
NERA Review of Draft Determination in respect of NZTGA authorisation Application (20 May 2022) at  
[53] and [57].  
Tegel’s submission in response to the SOPI at [7.13].  
Ibid at [10.4] and [10.7] to [10.8]; and Tegel submission on the Draft Determination dated 20 May 2022 at  
[3.5] to [3.7].  
127  
128  
129  
[
] Submission on NZTGA Authorisation Application [  
] at [6].  
4461240  
29  
135. Tegel points to the costs incurred in recent individual and collective negotiations.  
Based on its experience Tegel considers that collective bargaining pursuant to the  
Proposed Arrangement would lead to higher transactions costs than individual  
bargaining.130 Assuming there would be three rounds of significant contract  
negotiations over a 10-year period, Tegel estimates this would result in a transaction  
cost detriment of approximately $3.6 million.131  
136. Tegel claims that heterogeneity among growers would effectively substitute internal  
negotiating costs (within the TGA) for external negotiating costs (between the TGA  
and Tegel).132 Transaction costs would arise as the growers internally negotiate a  
collective position that aligns all members’ interests but that is also acceptable to  
Tegel. Given differences in grower circumstances, this alignment would be difficult,  
says Tegel. Internal negotiations would be costly and lengthy, Tegel submits, shifting  
transaction costs to internal discussions rather than producing net savings.  
137. One grower who resigned from TGA claims that the annual TGA membership fees do  
not provide real value,133 and another former TGA grower claims that additional legal  
fees [  
] were larger than if they were negotiated individually.134 These  
former TGA growers considered that TGA did not represent all growersopinions,  
and poor communication from TGA made it difficult to quickly reach a collective  
view.  
138. These growers claim their individual negotiations with Tegel were relatively short  
and straightforward. They claim [  
] and that additional  
costs were no different to that of any commercial negotiation.135, 136  
[
].137  
[
]. This is  
consistent with Tegel’s submissions on the counterfactual.  
130  
NERA Review of Draft Determination in respect of NZTGA authorisation Application (20 May 2022) at  
[53].  
Ibid at [57].  
131  
132  
133  
NERA Submission on the SOPI (5 November 2021) at [17] to [19].  
Commerce Commission interview with [  
the TGA [  
]. The Commission understands that  
]. Commerce  
]. [  
Commission interview with TGA (15 December 2021).  
Commerce Commission interview with [  
134  
]. Former TGA growers also said TGA  
does not communicate well with growers. Commerce Commission interview with  
[
]; and Commerce Commission interview with [  
].  
135  
136  
[
].  
[
].  
137  
[
] Submission on NZTGA Authorisation Application [  
] at [6].  
4461240  
30  
139. In response, TGA claim that the most recent bilateral and collective negotiations  
[
] are not representative of normal negotiations and cannot be used to  
estimate future negotiating costs.138 In particular, TGA submits:  
139.1 [  
].139 Under the  
counterfactual, the FMAs would no longer be able to be used and new  
agreements would have to be reached requiring more substantive  
negotiations. Given the imbalance of bargaining power in the counterfactual,  
Tegel would likely impose significantly less attractive terms on growers.  
Growers are more likely to require additional support or expert advice before  
agreeing to the terms;  
139.2 the growers [  
] negotiated in a context where the Authorisation  
Application had been lodged or was being prepared.140 Collective bargaining  
was a potential future option or an actual option for these growers;  
139.3 Tegel was strongly incentivised to provide examples of quick and low-cost  
individual negotiations to influence the Commission’s decision.141 Tegel was  
incentivised to  
[
]; and  
139.4 [  
].142, 143  
[
].  
140. In response, Tegel submits:  
140.1 [  
[
].144  
]; 145  
140.2 [  
].146  
[
];  
and  
138  
Link Economics – Comments on submissions on the Commerce Commission’s Draft Determination (15  
June 2022) at [24].  
Ibid at [25] to [26].  
Ibid at [28].  
Ibid at [29]b.  
Ibid at [30].  
139  
140  
141  
142  
143  
[
]. Letter from Lane Neave to Commerce Commission dated 18 July 2022 at [3].  
Tegel’s cross-submission dated 6 July 2022 at [46].  
Ibid at [91].  
Ibid at [46].  
144  
145  
146  
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31  
140.3 [  
].147  
Our assessment of avoided ongoing transaction costs  
141. The Commission considers it likely that over time, elements of the FMAs are likely to  
require amendments, clarification, or renegotiation under both the factual and  
counterfactual. For instance, given their relevance to  
[
].148  
142. Given the detail and substantial nature of such negotiations, the Commission  
considers that collective bargaining is more likely to lead to lower transactions costs  
in comparison to individual negotiations. Specifically, collective bargaining pursuant  
to the Proposed Arrangement is more likely to reduce the duration and costs of any  
negotiations by allowing a single negotiation process, and removing the duplication  
of negotiations and advisory costs for both parties.  
143. We do not consider that the heterogeneity across TGA growers would merely result  
in the shift of transactions costs from individual negotiations to internal TGA costs.  
There is a range of grower operations in terms of [  
], etc.  
However, we do not consider that these differences would necessarily lead to  
substantial transaction costs being incurred by TGA in the process of collective  
bargaining. This is because there is sufficient similarity in the services provided by  
growers such that the scope of negotiations is likely to be relatively narrow,  
[
].149  
144. In our view [  
TGA made [  
] agreement between TGA and Tegel, and the speed at which  
] offers on behalf of its members,150 suggest that the heterogeneity  
across the growers was not an impediment to [  
]. In particular, we  
consider that grower heterogeneity is unlikely to have resulted in relatively high  
internal transactions costs or delays. We consider existing heterogeneity across TGA  
growers would likewise not generate material internal transactions costs under  
collective bargaining so as to substantially offset other future transactions costs  
savings.  
145. Furthermore, the growers have the choice of leaving TGA if they disagree with its  
negotiating strategy and positions, [  
]. This reduces the  
147  
148  
149  
Ibid at [47].  
TGA’s cross-submission on the Draft Determination dated 15 June 2022 at [36] to [39].  
We note our view in this case is consistent with the ACCC’s observations in its Determination A91007:  
Coalition of Major Professional Sports (13 December 2006) at [7.25] to [7.26]:  
“… where the collective bargaining group supply very similar products or services (i.e. milk, chicken  
growing services) the potential scope of the negotiations are likely to be narrower than if the parties  
supply a wide-range of products requiring broader and more complex negotiations.”  
150  
[
]. Commerce Commission interview  
with TGA (15 December 2021); and Commerce Commission interview with  
].  
[
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32  
likelihood of internal disagreements amongst remaining members raising internal  
transaction costs.  
146. Tegel has pointed to evidence that shows that the transaction costs of its recent  
individual negotiations to vary contracts with selected growers were relatively low  
while the costs of its most recent collective negotiation with TGA [  
] were  
relatively large. Tegel submits that this is indicative of the likely costs of future  
individual and collective negotiations under either the counterfactual or factual. We  
similarly acknowledge the submission by [  
]
that the relative costs of negotiating individually with Tegel are less than via the  
TGA.151  
147. The Commission has placed weight on this evidence in reaching its view that,  
although it is more likely that collective bargaining would reduce transaction costs,  
the outcome is not certain.  
148. But equally, we consider that the evidence supports the view that TGA faces a form  
of competitive constraintfrom the growers who can, and in some cases do, seek to  
lower their costs by negotiating directly with Tegel. The ability for the growers to  
leave TGA and negotiate directly with Tegel likely disciplines TGA to negotiate in a  
timely and cost-effective manner with Tegel in the factual.152  
149. Additionally, while we acknowledge that some growers have recently individually re-  
negotiated specific parts of their contractual arrangements with Tegel in a relatively  
quick and low-cost manner, this does not necessarily reflect the time or cost that it  
would take for TGA’s members to bargain with Tegel bilaterally in the counterfactual.  
150. Those growers who are better positioned to negotiate individually with Tegel will  
likely have done so already.153 In contrast, the vast majority of remaining growers  
have either not chosen to bargain individually with Tegel despite the opportunity  
[
].154  
151. TGA submitted that Tegel was incentivised to reach re-negotiated agreements with  
selected individual growers quickly and at low-cost, [ ] to  
support its opposition to the Authorisation Application. We do not come to a view on  
this submission. This is because, as outlined above, we consider that the inferences  
151  
152  
[
] Submission on NZTGA Authorisation Application [  
] at [17] to [18].  
This constraint may be weaker in relation to some of the growers who may be especially reluctant to  
leave TGA because they have a strong preference not to negotiate with Tegel on an individual basis.  
However, we consider a material constraint on TGA to moderate transactions costs for the growers  
nevertheless exists.  
Link Economics – Comments on submissions on the Commerce Commission’s Draft Determination (15  
June 2022) at [29]; and Commerce Commission interview with [  
Commerce Commission interview with [  
153  
154  
].  
]; and TGA’s cross-submission on the  
Draft Determination dated 15 June 2022 at [168].  
4461240  
33  
that can be drawn from the costs of [  
] for potential future transactions  
costs under the counterfactual and factual are limited.  
152. Similarly, we do not consider that the costs incurred by TGA and Tegel [  
]
during the period of provisional authorisation necessarily reflect the costs that would  
be incurred in future collective negotiations pursuant to the Proposed Arrangement.  
[
].155 In contrast, TGA states  
that in previous collective negotiations significant expenses relating to external legal  
advice were not incurred.156  
153. We agree that similar legal costs to those incurred [  
] are unlikely to be  
incurred in future collective bargaining pursuant to the Proposed Arrangement,  
because there would not be the same need for  
[
].  
154. Consequently, we consider that Tegel’s estimate of the future transactions costs of  
collective bargaining ($[ ] over 10 years) likely overstates the actual transaction  
costs that would be incurred in the factual.157 In particular, we consider that the  
circumstances [ ] are relatively unusual and complex. Therefore, the  
likelihood that negotiations of a similar magnitude, complexity and legal  
consequence would be required again three times over the next 10 years in the  
factual as assumed by Tegel, appears low.  
155. On the other hand we also consider that there is a high likelihood that Tegel’s  
estimate of the transaction costs from individual bargaining ($[  
] over 10 years)  
understates the actual transaction costs that would be incurred in the  
counterfactual.158  
156. As outlined above, our view is that the contracts with growers in the counterfactual  
would be likely to closely reflect the existing FMAs in the short to medium term,  
albeit with minor but important variations [  
], in particular  
[
]. We consider that the terms that Tegel would likely  
seek to amend would be those for which growers are likely to seek financial and/or  
legal advice.  
157. We consider the same is likely to apply over the long-term insofar as grower  
contracts are likely to increasingly diverge from the current FMAs in the  
counterfactual as Tegel would likely seek to simplify the agreements with terms  
155  
Link Economics – Comments on submissions on the Commerce Commission’s Draft Determination (15  
June 2022) at [30].  
Ibid at [30].  
156  
157  
NERA Review of Draft Determination in respect of NZTGA Authorisation Application (20 May 2022) at  
Table 1.  
Ibid.  
158  
4461240  
34  
more advantageous to Tegel. We would expect that individual growers would  
typically seek financial and/or legal advice in response to such changes.  
158. Additionally, we consider that ongoing changes to the industry are likely. These  
include changes to environmental or animal welfare requirements which may  
require minor amendments of various terms within the FMAs on an ad hoc basis.159  
Tegel’s estimate does not include provision for the transactions costs likely to be  
associated with such ongoing developments.  
[
].  
160  
159. For these reasons, while we cannot exclude the real chance that the ‘worst-case’  
factual scenario from authorisation could be a net detriment in terms of avoided  
long-term transactions costs, we consider that even such a worst-case would likely  
generate a significantly lower detriment than Tegel’s $3.6 million estimate. We  
consider any transaction cost detriment would likely be limited by the fact that the  
growers can negotiate individually with Tegel if negotiating with TGA’s assistance  
becomes relatively costly.  
160. In contrast, TGA’s long-term transaction costs savings estimate of between $1 million  
to $3 million appears to be a reasonable estimate of the likely upper bound of these  
potential benefits.  
161. On balance, we place greater weight on the likelihood that collective bargaining  
would produce a material benefit in the form of avoided transactions costs over the  
10-year period of authorisation. However, because of the inherent uncertainty  
regarding the transactions costs that would be incurred in both the factual and  
counterfactual, we have not been able to estimate a precise quantitative range.  
162. Nevertheless, our view is that material benefits in the form of reduced transactions  
costs are more likely than not to arise from collective bargaining. This is primarily  
because of the underlying economies of scale available from collective bargaining.  
Additionally, we consider that the growers’ interests are more likely than not to be  
aligned on many elements of the FMAs, and [  
] serves to evidence  
that the heterogeneity across growers has not been an impediment to agreement  
consequent upon the provisional authorisation of the Proposed Arrangement.  
More efficient contract terms  
163. Collective bargaining can lead to more efficient contract terms. This can occur if it  
enables the resolution of marginal issues that would otherwise be too costly to  
resolve within individual negotiations between Tegel and the growers, or if it enables  
159  
Commerce Commission interview with Tegel (7 December 2021); Authorisation Application at [8.52];  
Appendix D of the Authorisation Application at [3.3]; and TGA’s cross-submission on the Draft  
Determination dated 15 June 2022 at [41].  
Link Economics – Comments on submissions on the Commerce Commission’s Draft Determination (15  
160  
June 2022) at [29.a].  
4461240  
 
35  
the sharing of information amongst the growers and the subsequent development of  
more nuanced contractual provisions that are more efficient.161  
Submissions on more efficient contract terms  
164. TGA submits that collective bargaining would allow growers to share information and  
pool together resources to fund specialist advisors so that they can develop more  
efficient contract terms.162 TGA argues this can be observed in the difference  
between the FMAs and the relatively simple payment structure that was in place  
prior to collective bargaining.163  
165. TGA submits further that these efficient terms are unlikely to persist absent  
authorisation.164 In TGA’s view, detailed bilateral negotiations would be too complex  
and costly for Tegel and, when combined with the greater bargaining power it would  
possess in individual negotiations, Tegel would have a reduced incentive to retain  
the current agreements, rendering the FMAs unstable.  
166. Tegel disputes these submitted efficiencies, claiming that in the counterfactual the  
FMAs would continue in their current form [  
bargaining would not produce simpler [  
FMAs are lost.166  
],165 and that individual  
] contracts where the efficiencies in the  
167. Tegel claims that the outcome of the individual negotiations it has had with (former)  
TGA members has resulted in [ ]. Tegel claims that the efficiencies of  
the collectively negotiated FMAs would continue in the counterfactual.  
168. We note a recent submission supports Tegel’s argument. A grower with whom Tegel  
negotiated directly told us  
[
].167  
169. Tegel also claims that the heterogeneity among growers would negate any efficiency  
benefit of collective bargaining that arises through economies of scale.168 Tegel169  
refers to King in support of its argument to say a “one-size-fits-all” contract can be  
inefficient if it does not respond to differences in the costs faced by members of a  
161  
Collective bargaining can also impact on the overall efficiency of the contractual arrangements between  
Tegel and the growers because it can affect the balance of bargaining power. These potential impacts are  
discussed further below in our discussion of the balance of bargaining power between the Tegel and the  
growers and assessment of the overall economic efficiency of the Proposed Arrangement.  
Appendix D of the Authorisation Application at [3.5.3].  
Authorisation Application at [8.3(b)].  
162  
163  
164  
Appendix D of the Authorisation Application at [3.3].  
Tegel’s submission in response to the SOPI dated 5 November 2021 at [7.8]; Commerce Commission  
165  
interview with [  
]; and Commerce Commission interview with  
[
].  
166  
167  
168  
169  
Tegel’s submission on the Draft Determination dated 20 May 2022 at [3.7].  
] Submission on NZTGA Authorisation Application [  
Ibid at [11] to [15].  
[
] at [6].  
NERA Review of Draft Determination in respect of NZTGA authorisation Application (20 May 2022) at  
[11].  
4461240  
 
36  
grower group.170 Tegel also refers to the Australian Competition Tribunal’s recent  
decision in Port of Newcastle where the Tribunal observed the presence of divergent  
requirements and preferences among a collective could reduce the likelihood of  
more efficient terms.171, 172  
170. On the other hand, TGA argues that the FMAs are not one-size-fits-all contracts.  
[
].173  
171. TGA argues that the facts of Port of Newcastle differ from those of the Authorisation  
Application. It emphasises that:174  
[T]he reasoning behind the Tribunal’s decision is primarily that many, if not all, of the nine  
coal producers would want to be represented at meetings with the Port, would want to  
consider the contractual terms within their own management teams and potentially take  
their own advice, and that the Port would likely continue to meet individually with the coal  
producers even in the presence of collective bargaining. The Tribunal therefore considered  
that there would not be substantial transaction costs savings from collective negotiation.  
172. Conversely, TGA says in this case the Commission is confronted with a large number  
of growers with relatively common interests of whom Tegel requires a largely  
homogenous product from.175 The fact that  
[
] indicates,  
according to TGA, the commonality of interests amongst the growers.  
173. TGA argues further that  
[
].176 TGA notes:  
173.1 [  
].177  
173.2 [  
].178  
170  
Stephen King (2013) Collective Bargaining by Business: Economic and Legal Implications. UNSW Law  
Journal, 36(1), [107] [138].  
Application by Port of Newcastle Operations Pty Limited (No 2) [2022] ACompT 1.  
NERA Review of Draft Determination in respect of NZTGA authorisation Application (20 May 2022) at  
171  
172  
[12].  
173  
Link Economics – Comments on submissions on the Commerce Commission’s Draft Determination (15  
June 2022) at [14].  
Ibid at [15].  
Ibid at [16].  
Ibid at [8].  
Ibid at [9].  
Ibid at [10].  
174  
175  
176  
177  
178  
4461240  
37  
174. [  
]:179  
174.1 [  
]; and  
174.2 [  
].  
175. On the other hand, Tegel claims that TGA’s statement, that the collectively  
negotiated [  
] is more efficient, is subjective.180 It is quite possible, says Tegel,  
that the parties are better off under the individually negotiated contracts. Tegel  
claims that collective bargaining produced less efficient terms, as evidenced by  
[
].  
176. Tegel further claims that it did not refer to Port of Newcastle because of its facts,  
rather because of the economic framework it adopted, which is similar to that set  
out by King.181, 182  
Our assessment of efficient contract terms  
177. Collectively negotiated contracts can more efficiently resolve marginal issues  
compared to contracts concluded by bilateral negotiations. This is because, absent  
the transaction cost savings arising from collective negotiations, it may be too costly  
to resolve such issues through individual negotiations.183 In contrast, by allowing  
negotiation and transaction costs to be shared across parties, collective bargaining  
can make it relatively less expensive for parties to effectively negotiate and resolve  
marginal issues.  
178. Collective bargaining can also facilitate the sharing of information that can enable  
the more efficient resolution not only of marginal issues, but more substantive  
matters, such as fee structures or investment incentives.184 This may enable more  
sophisticated, efficient, and mutually beneficial contracts to be reached.185  
179. We consider that, consistent with the economic theory outlined above, the evidence  
in relation to this authorisation application shows that the efficient resolution of  
marginal issues is more likely with collective bargaining.  
180. A previous example of collective bargaining leading to more efficient contract terms  
occurred [  
[
].186  
179  
180  
Ibid at [11].  
NERA Response to New Material in 15 June 2022 Link Economics Report in response to Link Economics  
at [11].  
Ibid at [15].  
181  
182  
183  
184  
185  
186  
Stephen King - Collective Bargaining by Business.  
Ibid at [114].  
Ibid at [116] to [117].  
Ibid at [119].  
Commerce Commission interview with [  
].  
4461240  
 
38  
]. In our view, such issues are more likely to be efficiently resolved in a  
similar manner in the future pursuant to the Proposed Arrangement.187  
181. Furthermore, although collective bargaining may require members of the collective  
to forgo individual preferences in order to reach a unified position, the risk of  
diverging incentives is lessened when participation in the bargaining group is  
voluntary.  
182. In any event, we consider that collective bargaining does not necessitate a ‘one-size-  
fits-all’ approach.  
183. We consider this is evidenced by the existing FMAs that are the result of collective  
bargaining which already accounts for heterogeneity amongst growers.  
[
].  
184. While we consider collective bargaining would be more likely to reduce transactions  
costs so as to enable marginal issues to be resolved more efficiently, it is not clear  
that the magnitude of this specific benefit would necessarily be large.188 This is  
because such outcomes may address relatively moderate innovations to growing  
methods or technologies, or relatively minor future regulatory changes (eg, animal  
welfare and environmental) which would precipitate amendments to the FMAs.189  
185. However, although it is not certain, we also consider that there is a real chance that  
the sharing of information amongst growers and the development of more complex,  
nuanced contract terms by TGA, which is better resourced than any individual  
grower, could produce substantial efficiency gains. For this reason we have placed a  
moderate weight on this potential benefit.  
Potential impact on the balance of bargaining power  
186. By lessening competition between growers, collective bargaining has the potential to  
alter the balance of bargaining power between suppliers and buyers. Any such  
change in the balance of bargaining power can give rise to detrimental and/or  
beneficial impacts on overall economic efficiency. To determine the likely efficiency  
impacts, it is necessary to first consider whether, and how, collective bargaining  
would impact the balance of bargaining power.  
187  
To be clear, we do not consider that collective bargaining is necessary to ensure the efficient resolution of  
all such issues. Rather, we consider such issues are more likely to be efficiently resolved, and more  
efficient contract terms are more likely to be widely disseminated across growers, with collective  
bargaining.  
188  
We discuss the potential effect of collective bargaining on the balance of bargaining power between  
growers and Tegel, which may be likely to have more substantive impacts on overall economic efficiency,  
further below.  
[
189  
].  
4461240  
 
39  
187. Notwithstanding the fact that growers would not be entitled to arrange or  
participate in a collective boycott, and that Tegel would not be compelled to  
negotiate with TGA in the factual, enabling growers to collectively bargain can  
nevertheless improve growers’ bargaining position. This could, at least partially,  
redress what might otherwise be an imbalance of bargaining power in favour of  
Tegel in the counterfactual.  
Submissions on bargaining power imbalance  
188. TGA submits that there is an imbalance of bargaining power between Tegel and  
individual growers, such that Tegel possesses strong buyer (monopsony) power.190  
This is primarily because of the limited customer options that growers face for  
supplying growing services says TGA. TGA argues that the need for growers to make  
significant investments in shedding specifically designed to raise broiler chickens  
generates a risk that these assets could become stranded, creating the potential for  
a hold-up problem. It claims that this risk is currently particularly acute because  
Tegel has reduced its output, which would enable it to play growers off against each  
other for supply arrangements.  
189. TGA also argues that  
[
].191 TGA also  
claims that [  
].192  
190. The TGA growers we interviewed indicated that, in their view, many growers are not  
confident negotiating with a large commercial entity such as Tegel.193 These growers  
consider that greater bargaining power would allow Tegel to obtain more favourable  
terms at the expense of growers  
[
]. Supplying  
Tegel is the only realistic option for most growers to earn a return on their  
investments in shedding and other equipment.  
191. Tegel takes a different perspective of the balance of bargaining power between the  
parties. The processor submits there is no imbalance of bargaining power between  
Tegel and growers that favours Tegel.194 Instead, Tegel urges the Commission the  
relationship should be categorised as one of mutual dependence, and authorisation  
will lead to an imbalance in favour of the growers.  
192. Tegel claims that it only has a large network of substitutable growers in times of  
excess growing capacity. In times of strong demand, it would typically take two to  
three years to add a new grower because of the time to find suitable land and obtain  
190  
Authorisation Application at [5.21]; and Appendix D of the Authorisation Application at [3.2.1].  
Authorisation Application at [5.23] to [5.25].  
Ibid at [5.26].  
191  
192  
193  
Commerce Commission interview with [  
interview with [  
]; and Commerce Commission  
]; and Commerce Commission interview with  
[
].  
194  
Tegel’s submission on the Draft Determination dated 20 May 2022 at [2.5]; NERA Review of Draft  
Determination in respect of NZTGA authorisation Application (20 May 2022) at [49].  
4461240  
 
40  
resource management consents.195 In its view, the time it would take to replace a  
grower balances the distribution of bargaining power between the parties.  
193. Tegel also submits that  
[
].196  
194. Tegel quotes the Port of Newcastle decision in support.197, 198 In that case the  
Tribunal determined that the relationship between the Port and its major coal  
producing customers was one of mutual dependence, because the coal producers  
were dependent on the Port for access to export markets while the Port was  
dependent on the coal producers for approximately 70% of its revenue.199 By  
extension Tegel submits that the growers are dependent on Tegel for the provision  
of growing services while Tegel is dependent on the growers to provide grown  
chickens.200  
195. Tegel emphasises its prevailing view during the course of the Commission’s  
investigation that  
[
], as evidence that there is no imbalance of bargaining power in Tegel’s  
favour.201 Tegel claims that [  
].202  
196. We note:  
196.1 A former TGA member who reached an individual agreement with Tegel told  
us [ ] suggesting that relative  
bargaining power between the parties was balanced.  
[
].203  
195  
NERA Review of Draft Determination in respect of NZTGA authorisation Application (20 May 2022) at  
[46]  
Tegel’s response to TGA’s cross-submission dated 6 July 2022 at [47].  
Tegel’s submission on the Draft Determination dated 20 May 2022 at [2.4].  
Application by Port of Newcastle Operations Pty Limited (No 2) [2022] ACompT 1.  
Ibid at [238].  
Tegel’s submission on the Draft Determination dated 20 May 2022 at [2.5].  
Tegel’s submission in response to the SOPI dated 5 November 2021 at [5.3] to [5.7]; Commerce  
Commission interview with Tegel (7 December 2021); and NERA Review of Draft Determination in  
respect of NZTGA authorisation Application (20 May 2022) at [38].  
196  
197  
198  
199  
200  
201  
202  
203  
[
].  
Commerce Commission interview with Tegel (7 December 2021).  
[
] Submission on NZTGA Authorisation Application [  
] at [7].  
4461240  
41  
196.2 Some other former TGA members have also suggested that  
[
[
].204  
].205 Another grower was of the view that  
because of the symbiotic relationship between Tegel and its growers, Tegel  
must be sustainable for the growers to be sustainable.206  
197. In response, TGA submits:  
197.1 Growers are entirely dependent on Tegel to recover their sunk investment,  
while Tegel is not entirely dependent on any individual grower.207  
Authorisation would only partially offset this bargaining power imbalance.208  
197.2 The Port of Newcastle decision is clearly distinguishable from this case  
because unlike the growers, the coal producers were often larger in size than  
the Port; and because the Port depended on the coal producers for the bulk  
of its revenue which is not so for Tegel in relation to the growers.209  
197.3 The Australian Competition Tribunal’s decision in VFF Chicken Growers and  
the ACCC’s determination in Perishable Agricultural Goods Inquiry  
demonstrate that although collective bargaining can provide growers with  
some degree of countervailing power, collective bargaining does not  
eliminate a chicken processors substantial monopsony power in dealings  
with its growers.210, 211  
197.4 Tegel has options if it faces a shortage of capacity including building new  
farms, sponsoring new sheds on existing farms, approaching Inghams’  
growers in the Waikato, reducing the time between runs, or raising prices.212  
198. In its cross-submission, Tegel submits:  
204  
[
]. Commerce Commission interview with [  
]; and Commerce Commission interview with [  
].  
205  
Commerce Commission interview with [  
Commerce Commission interview with [  
Link Economics – Comments on submissions on the Commerce Commission’s Draft Determination (15  
June 2022) at [23].  
TGA’s cross-submission on the Draft Determination dated 15 June 2022 at [5a].  
Ibid at [5b].  
].  
206  
207  
].  
208  
209  
210  
211  
Ibid at [5c].  
VFF Chicken Meat Growers’ Boycott Authorisation [2006] ACompT 2; and ACCC Perishable Agricultural  
Goods Inquiry- Final Report published 10 December 2020.  
TGA’s cross submission on the Draft Determination dated 15 June 2022 at [26].  
212  
4461240  
42  
198.1 Mutual dependence can arise in different ways.213 Even if Port of Newcastle is  
distinguishable from this case, the key factual finding stands.  
198.2 The facts of this case differ from the VFF decision.214 Tegel cannot exercise  
monopsony power as it “cannot easily switch to alternative suppliers, sponsor  
new entry or self-supply, and any attempt to do so would incur substantial  
sunk costs.215, 216  
198.3 None of the options which TGA suggests are available for Tegel to respond to  
a shortage of capacity are viable.217  
Our assessment on the imbalance of bargaining power  
199. While there is clearly a degree of mutual dependence between Tegel and growers,218  
we consider that in the counterfactual, in which existing FMAs would likely be  
invalid, there would likely be an imbalance of bargaining power in favour of Tegel.  
This is because most, if not all, growers are unlikely to have an effective alternative  
demand for their growing services or alternative use for many of their assets (sheds).  
Such an imbalance is likely to be particularly acute at the present time given the  
recent negative demand shocks which have resulted in excess capacity in Tegel’s  
growing network.  
200. Up to [ ] of growers’ farm values can be derived from the FMAs.219 This  
demonstrates growers’ dependence on Tegel, and the asset stranding risk growers  
face given the lack of substitutability of chicken growing sheds to other uses.220  
Additionally, geographic constraints typically limit the ability of Tegel’s growers to  
supply other processors.221 No other processor is located in the Taranaki region, and  
although Brinks could theoretically contract with Tegel growers in Auckland and  
Canterbury, we understand Brinks already has sufficient supply from its own  
contracted growers in these regions.222 Additionally,  
213  
Tegel’s response to TGA’s cross-submission dated 6 July 2022) at [5 & 6].  
Ibid at [11].  
Ibid.  
214  
215  
216  
Tegel submits, based on figures provided by TGA, that it would cost  
[
]. Ibid at [26 & 27].  
217  
218  
219  
220  
Ibid at [26 & 27].  
Recall we believe the parties stand in a mutually beneficial relationship in their commercial dealings.  
Commerce Commission interview with [ ].  
See Appendix D of the Authorisation Application at [3.2]; Commerce Commission interview with  
]; Commerce Commission interview with [  
[
].  
221  
222  
Code of Welfare: Transport within New Zealand at section [4.1]; SPCA Certified Standards for Free Range  
Meat Chickens (version 1.1 2021) at [E64].  
See Authorisation Application at [3.23] and [5.30]. We note that over time if market conditions change  
Brinks could seek further supply from Tegel’s growers. However, even in this situation  
[
] may continue to make Brinks an unattractive alternative for  
Tegel’s growers. We further note that in our interview with Brinks (23 November 2021),  
[
].  
4461240  
 
43  
[
[
].223  
].  
201. In contrast, because of its network of substitutable individual growers, in the  
absence of the existing FMAs Tegel would be able to credibly threaten to cease  
purchasing growing services from any given grower. This is especially true at the  
present time given [  
]. This would provide Tegel with a strong  
bargaining position in bilateral negotiations.  
202. Tegel’s level of available resources would further enhance its bargaining position  
over individual growers in the counterfactual. Tegel is substantially larger and more  
commercially sophisticated than individual growers.  
203. The time and investment required to either add or replace a grower, particularly in  
times of strong demand, could reduce Tegel’s bargaining power by some degree.224  
Similarly, growers who have not made substantial investments recently, and have  
effectively recovered most of their sunk costs, may face less harm from losing a  
contract with Tegel. The bargaining power imbalance may be less pronounced for  
these growers. Nevertheless, while these factors may place outer limits on the  
bargaining power of Tegel and growers, we do not consider that these factors would  
substantially change the balance of bargaining power from favouring Tegel in its  
negotiations with individual growers in the counterfactual.  
204. In the factual, in which the existing FMAs would continue to apply (subject to any  
amendments negotiated between Tegel and the TGA), the balance of bargaining  
power is less clear.  
205. On the one hand, Tegel points to its estimates that, under the existing FMAs agreed  
pursuant to collective bargaining,  
[
]. Tegel  
considers that this is evidence that collective bargaining has provided, and would  
continue to provide, growers with the stronger bargaining position.  
206. On the other hand, Tegel is not compelled to negotiate with the TGA even if  
collective bargaining is authorised, and authorisation would not allow the TGA to  
organise a collective boycott by growers. This means that Tegel can cease  
engagement in collective negotiations if the balance of bargaining power tilts in  
favour of the TGA.  
207. Regarding Tegel’s submission that  
[
], we disagree.225  
[
223  
See Appendix D of the Authorisation Application at [3.2.1].  
NERA Review of Draft Determination in respect of NZTGA authorisation Application (20 May 2022) at  
224  
[46] [49].  
225  
Tegel’s response to TGA’s cross-submission dated 6 July 2022 at [47].  
4461240  
44  
].226 This means that Tegel retains a degree of control over these  
contracts.  
208. In any event, we do not consider that it is necessary for us to reach a definitive  
position on the relative bargaining strength of the two parties in the factual. It is  
sufficient to identify that authorising collective bargaining would be likely to increase  
the bargaining power of growers relative to the counterfactual. The potential  
efficiency impacts of this likely change in bargaining power from the resulting  
negotiations are discussed below.  
209. We also agree with TGA’s cross-submission that Port of Newcastle is distinguishable  
on the facts. This is primarily because of the relative importance of individual coal  
producers to the Port compared to the importance of individual growers to Tegel.  
The Port is significantly more dependent on individual coal producers than Tegel is  
on any one grower. This means that individual growers possess significantly less  
bargaining power in negotiations with Tegel, than the individual coal producers have  
in negotiations with the Port:  
209.1 The Port faces a smaller number of counterparties: it relies on eleven coal  
producers. 227 Conversely, Tegel is supplied by approximately [ ] growers of  
which [ ] are members of TGA.228, 229  
209.2 Furthermore, many of the coal producers are large multinational companies  
whose Australian coal mining operations are larger in financial terms than the  
Port.230  
209.3 In contrast, most TGA growers are small family-owned businesses that are  
likely less capable of negotiating with Tegel themselves.231  
Efficiency impacts of increased bargaining power for growers  
210. By lessening competition between growers, collective bargaining can increase their  
bargaining power with Tegel because it reduces Tegel’s ability to play growers off  
against each other.  
211. Increased bargaining power could enable growers and TGA to exert a greater  
influence on the terms of any supply agreements that are ultimately agreed with  
Tegel. This in turn could impact the overall economic efficiency of the supply  
arrangements in several ways:  
226  
Consequently, regarding Tegel’s submission that it would likely face substantial sunk costs, this appears  
to primarily relate to any potential future self-supply of growing services by Tegel.  
Application by Port of Newcastle Operations Pty Ltd (No 2) [2022] ACompT 1 at [99].  
NERA Review of Draft Determination in respect of NZTGA authorisation Application (20 May 2022) at  
227  
228  
Appendix B.  
229  
Link Economics – Comments on submissions on the Commerce Commission’s Draft Determination (15  
June 2022) at [16].  
230  
Application by Port of Newcastle Operations Pty Ltd (No 2) [2022] ACompT 1 at [105].  
Authorisation Application at [5.25]; TGA’s cross submission on the Draft Determination dated 27 June  
231  
2022 at [6]b; and see Commerce Commission Interview with [  
].  
4461240  
 
45  
211.1 Allocative efficiency detriments could arise if collective bargaining by growers  
were to lead to higher growing fees and/or lower quality services. Such  
detrimental impacts could ultimately be passed on to final consumers in  
downstream retail markets.  
211.2 Productive efficiency detriments could arise if a reduction in competition  
between growers were to result in the less efficient use of resources in the  
growing process.  
211.3 Dynamic efficiency detriments could arise if reduced competition leads to  
decreased innovation in products and/or production processes.  
212. Alternatively, improving the bargaining power of growers through collective  
bargaining could also have efficiency enhancing impacts. For instance, collective  
bargaining could potentially redress a bargaining power imbalance that might  
otherwise enable Tegel to reduce fees or other supply terms to growers below  
competitive levels and create the risk of ‘hold up’ problems. In so doing, collective  
bargaining can improve overall economic efficiency if it helps ensure that growers  
have appropriate incentives to invest in chicken growing operations and the  
certainty that they will be able to recover sunk costs, such that there is a greater  
level of output that ultimately benefits end consumers.  
Submissions on efficiency impacts  
Hold-up problems and efficient investment by growers  
213. TGA claims that the enhanced bargaining power that Tegel would have without the  
Proposed Arrangement would result in Tegel  
[
].  
214. TGA claims that bargaining power and risk would be better balanced with the  
Proposed Arrangement, so that growers could obtain more favourable terms relative  
to if they faced Tegel alone.232 Such rebalancing could help address potential ‘hold-  
up’ problems. That is, without [  
] contractual certainty, growers would be less  
likely to invest in their farms out of fear of becoming too reliant on Tegel, with the  
result being that Tegel could capture a substantially large share of the benefits from  
growers’ investments.  
215. This is because the capital equipment used for chicken growing is specialised and  
cannot be readily put to alternative use. This means growers risk being left with large  
debts and stranded assets if they fail to obtain sufficiently secure supply  
arrangements with Tegel.233 Without [  
] contractual certainty Tegel would have  
strong bargaining power over growers, leaving little incentive for growers to invest in  
their farms. TGA points to the lack of [  
] certainty which existed under the  
232  
233  
Authorisation Application at [8.3 (e)] and [8.15] to [8.16].  
Authorisation Application at [1.21 (c)]. See also [3.1.2] and [3.2.2] of Appendix D of the Authorisation  
Application.  
4461240  
 
46  
[
[
] contracts prior to the FMAs, and claims that  
].234  
216. TGA claims that the current FMAs minimise this risk by being [  
the result that [  
] agreements with  
].  
[
] further incentivise investment, grower performance and competition  
among growers. These changes were driven by TGA to improve contractual certainty  
].235 TGA argues that both changes  
[
demonstrate how collective bargaining can facilitate a resolution to the hold-up  
problem.  
217. TGA submits that the consequence of the bargaining power imbalance that would  
arise without collective bargaining is that efficiencies within the FMAs, which are [ ]  
pages long and were negotiated over a [  
] period, would likely be lost absent  
authorisation. 236  
218. The TGA growers we interviewed supported TGA’s claims. These growers said the  
[
[
] nature of the FMAs are essential for  
].237 This contrasts with the [  
] fee  
payment structure that was typical of the contracts prior to the FMAs. Therefore,  
TGA submits that collective bargaining has resulted in the current FMAs and has  
enhanced dynamic efficiency.  
219. In contrast, Tegel submits that grower payments under the FMAs are:  
219.1 Inefficiently structured,  
[
];238 and  
219.2 inefficiently high,  
[
].239  
].240  
220. Regarding the structure of grower fees,  
[
234  
TGA’s cross submission on the Draft Determination dated 15 June 2022 at [135].  
Ibid at [135].  
See Appendix B of the Authorisation Application; and Tegel’ submission in response to TGA’s Provisional  
235  
236  
Authorisation dated 12 October 2021 at [2.5] to [2.7].  
237  
238  
239  
Commerce Commission interview with [  
interview with [  
]; and Commerce Commission  
].  
Tegel’s submission in response to the SOPI dated 5 November 2021 at [5.2] to [5.7]; and Commerce  
Commission Interview with Tegel (8 December 2021).  
[
] Commerce Commission Interview with Tegel  
(8 December 2021); and Tegel’s submission in response to the SOPI dated 5 November 2021 at [5.4] to  
[5.7].  
240  
Tegel’s submission in response to the SOPI dated 5 November 2021 at [5.1].  
4461240  
47  
[
].  
221. Tegel submits that the FMAs [  
] effectively insulated  
growers from the negative shocks arising from the Infectious Bursal Disease (IBD)  
outbreak and COVID-19, both of which have adversely affected domestic and export  
demand.241 [  
].  
222. Similarly, a grower who signed an individual agreement with Tegel claims  
[
].242  
Higher growing fees and allocative efficiency detriments  
223. Tegel submits that authorisation could lead to less allocatively efficient outcomes. If  
the counterfactual would result in lower grower fees and reduce Tegel’s losses, then  
collective bargaining would likely be less allocatively efficient.243  
224. TGA submits that any subsequent downstream price change resulting from  
authorisation would be sufficiently insignificant so that it would not materially affect  
demand for chicken products.244 TGA estimates that if there is an increase in grower  
fees because of collective bargaining, it would be equivalent to no more than around  
[ ] cents per bird. An increase in fees of this magnitude would generate  
approximately $[  
current grower costs are in the order of $[  
chicken products are in the order of $[  
] per year of additional cost to Tegel.245 In comparison, Tegel’s  
]246 and Tegel’s total revenue from  
].247  
225. TGA claims that even if grower fees were lower with individual bargaining,  
downstream wholesale and retail chicken prices would be no lower than if collective  
bargaining were authorised. This is because of the small difference between growing  
fees in the factual and counterfactual, and because of Tegel’s current losses.  
226. [  
[
].248  
]. For instance, Tegel has  
241  
[
] Commerce Commission interview with Tegel (7 December 2021).  
] Submission on NZTGA Authorisation Application [  
NERA Submission on NZTGA SOPI (5 November 2021) at [44].  
Appendix D of the Authorisation Application at [3.5.4].  
55 million birds multiplied by the [ ] cent per bird increase in price. Authorisation Application at [3.12];  
and Appendix D of the Authorisation Application at [3.5.4].  
242  
[
] at [16].  
243  
244  
245  
246  
[
]. See Tegel’s submission in  
response to the SOPI dated 5 November 2021 at Table 5.  
[
] Tegel’s  
submission in response to the SOPI dated 5 November 2021 at [5.1(a)].  
Tegel’s poultry revenues are estimated based on figures at [2.13] of Tegel’ submission in response to  
TGA’s Provisional Authorisation dated 12 October 2021.  
247  
248  
Tegel’s submission in response to the SOPI dated 5 November 2021 at [11.4].  
4461240  
48  
recently announced that it would increase its downstream prices by approximately  
10%.249 [  
[
].250  
].251  
] of grower fees would not mitigate the effect on  
227. Tegel claims that [  
allocative efficiency.252 Tegel submits that:  
227.1 competition occurs on more dimensions than just price, and higher fixed  
costs will prevent Tegel from making the necessary investment to compete  
on other dimensions,253  
227.2 all costs [  
] over a longer period and so should be assessed as such  
over a ten-year period,254 and  
227.3 in the real-world firms do not follow short-term economic theory exactly;  
firms aim to recover [ ] costs in their pricing decisions.255  
228. Tegel further claims that because the Commission has already granted authorisation  
for Inghams’ growers to collectively negotiate, Inghams faces a similar cost increase  
to Tegel in the factual.256 Granting authorisation to a second processor’s growers to  
engage in collective bargaining would set a precedent and so it should be assumed  
that growers supplying other processors would similarly seek authorisation. The  
result would be that competition is less likely to constrain the pass-through of  
increased grower costs if such increases are faced by other processors.  
229. Brinks also submits that TGA could exert inappropriate price pressure on Tegel if  
collective bargaining is authorised.257 Brinks considers that Tegel would have no  
option but to pass any cost increase on to its customers, who would in turn increase  
prices to final consumers.  
Other productive and dynamic efficiency impacts  
230. TGA claims that authorisation would not produce any productive or dynamic  
efficiency detriments because a collectively negotiated agreement is more  
249  
See Tegel announces chicken prices to be bumped up 10 percent.  
250  
[
] Commerce Commission interview  
with Tegel (7 December 2021).  
[
251  
]
Commerce Commission interview with Tegel (7 December 2021)  
252  
NERA Review of Draft Determination in respect of NZTGA authorisation Application (20 May 2022) at  
section [3.1].  
Ibid at [23]A.  
Ibid at [23]B.  
Ibid at [23]C.  
253  
254  
255  
256  
257  
Ibid at section [3.2].  
Van Den Brinks Poultry Limited