The commission has appealed a High Court ruling allowing Southern Cross to buy Aetna and keep hold of its 40,000 policies.

The hearing is expected to last three days.

Initial arguments centred on the commission’s powers to grant "clearances" when it doesn’t consider a potential takeover to be anti-competitive under the Commerce Act.

Southern Cross applied for a clearance to buy Atena three times. On the first two occasions, the commission declined. The third application, which included a promise to sell all of Aetna’s policies, was granted.

Lawyers for the commission said the competition watchdog was obliged to decline clearance applications unless it was satisfied an acquisition wouldn’t breach the act.

It did not have leeway to give applicants the benefit of the doubt.

In Aetna’s case, there was some uncertainty about the ability of new players to enter the health insurance market and compete with the enlarged Southern Cross group.

This uncertainty meant the commission had to decline the initial applications for clearance, its lawyers said.

Earlier this year the High Court in Auckland ruled that Southern Cross wouldn't have a dominant position by buying Aetna, as the barriers to entry in the market were very low.

The case continues today when lawyers for Southern Cross will begin their arguments.