Most readers sensibly avoided giving any putative answers, no doubt assuming there was a trick somewhere.
Well, sort of. What I was trying to highlight was what I think is an anomaly in the Commerce Commission's, and the New Zealand courts', approach to applying the 'net benefits' test when considering authorising a merger: if there are benefits of assorted kinds that outweigh the detriments from lessened competition, the merger can be authorised.
That's all straightforward and as it should be. But where I think something has gone wrong is this bit, which I've extracted from the Commission's Authorisation Guidelines (pdf), footnotes omitted:
The Commission refers to a couple of cases supporting this approach. One of them (Godfrey Hirst NZ Ltd v Commerce Commission (2011) 9 NZBLC 103,396) appears to be behind a paywall - how anyone has appropriated what should be a publicly available resource isn't clear to me - but the other, New Zealand Bus Ltd v Commerce Commission  3 NZLR 433 (CA), is freely gettable attable (here, if you're a competition tragic). The Guidelines refer to this observation, by Wilson J, in New Zealand Bus:37. In our assessment we regard a public benefit as any gain to the public of New Zealand that would result from the proposed transaction regardless of the market in which that benefit occurs or whom in New Zealand it benefits. We take into account any costs incurred in achieving benefits.38. In contrast, in assessing detriments we only consider anti-competitive detriments that arise in the market(s) where we find a lessening of competition (whether substantial or otherwise).39. To illustrate the difference in our approach to benefits and detriments, if a transaction gives rise to a lessening of competition in market A and benefits in market A and market B, then:39.1 the public benefit is counted across both markets A and B; and39.2 only those detriments arising in market A are counted.
So it seems to be settled. Benefits anywhere and everywhere from a merger will be counted towards the net benefit test, but detriments will only be counted in the market(s) affected by the lessening of competition.As the Commission correctly held in Goodman Fielder Ltd/Wattie Industries Ltd (1987) 1 NZBLC (Com) 104,108 at 104,147 and in Air New Zealand Ltd/Qantas Airways Ltd (23 October 2003 Decision 511) at para , all benefits must be taken into account whereas only detriments in a market where competition is lessened will be relevant.
Perhaps somebody learned in the law can put me right on this, but as it stands, this makes zero logical sense to me. And the exam question was rigged to show how this process could go wrong. There were net benefits from the hypothetical merger arising in the market where competition was lessened (a gain of NZ$2 trillion outweighing a detriment of NZ$1 trillion) so the merger would have been authorised, despite the fact that there were substantial detriments (NZ$3 trillion) in other markets* that did not get a look in. If they could have been counted (and why shouldn't they be, if they are real and caused by the merger?) the merger should have been declined: there was an overall net national detriment of NZ$2 trillion (the NZ$1 trillion net benefit in the markets directly affected, less the NZ$3 trillion detriment in other markets).
As far as I know, no real world merger authorisation has hinged on this. But someday it might. And it shouldn't. While Parliament is looking at some changes to the Commerce Act, it could usefully take the opportunity to clarify that mergers ought to be judged on their overall national impact, and not on a skewed subset of them.
*I tripped over my own feet a bit in phrasing the mock question. The detriments caused by the shutdown of the aluminium smelter would have been counted in the allocative efficiency impacts of the merger in the electricity market, so they wouldn't be part of the additional NZ$3 trillion detriment. I should have said the NZ$3 trillion arose wholly in the downstream markets for aluminium.