ACCC accepts undertaking in National Foods Ltd / Dairy Farmers acquisition

The Australian Competition and Consumer Commission will not intervene in the acquisition of Australian Co-operative Foods Ltd* (Dairy Farmers) by National Foods Ltd and Warrnambool Cheese and Butter Factory Company Holdings Ltd, after accepting court-enforceable undertakings from National Foods and its holding company Kirin Holdings (Australia) Pty Ltd, ACCC Chairman, Mr Graeme Samuel, said today.

National Foods and Dairy Farmers are two of Australia's major dairy companies, producing a wide range of dairy products including fresh drinking milk, flavoured milk, yoghurts, dairy desserts, cheese and cream. WCB is a dairy processor that supplies and manufactures cheese, fresh white milk, fresh flavoured milk, milk powder, whey protein concentrate, butter and cream.

Under the proposed acquisition, National Foods will acquire the facilities and operate the existing business of Dairy Farmers, aside from the cheese business. National Foods and WCB will establish a joint venture to run the existing cheese business of Dairy Farmers. National Foods and WCB will continue with their own cheese businesses separately.

National Foods offered a court-enforceable undertaking, under section 87B of the Trade Practices Act 1974, prior to the ACCC forming a view on the competition aspects of the proposed acquisition.

Under the proposed undertaking, National Foods will divest or cause the divestiture of certain milk processing plants and associated depots and drinking milk distribution contracts in New South Wales and South Australia. National Foods will supply raw milk to the approved purchaser(s) under certain terms in these states. It will also license (perpetual or time-limited) certain brands of fresh white milk and flavoured milk in NSW, the ACT and South Australia to the approved purchaser(s). These assets are to be divested to a purchaser or purchasers approved by the ACCC.

The ACCC was concerned that, in the absence of the undertaking, the proposed acquisition would lead to a substantial lessening of competition in the NSW and South Australian markets for the wholesale of fresh white milk and flavoured milk and in the central NSW regional market for the acquisition of raw milk.

The undertaking adequately addresses concerns over National Foods' ability to use its position in these markets post acquisition to put in place a sustained price rise or otherwise reduce the quality of its goods or services, or its trading terms with raw milk suppliers.

"The ACCC is satisfied that the proposed acquisition, subject to the court enforceable undertaking, would be unlikely to substantially lessen competition in the relevant markets," Mr Samuel said.

The undertakings will be available on the ACCC's website. A Public Competition Assessment will be issued on the ACCC's website in due course.

*The Dairy Farmers sale is subject to a competitive bid process. Another bidder is a consortium comprising Parmalat SPA and Murray Goulburn Co-operative Co Ltd. Information regarding the ACCC's merger review of this bid can be found at http://www.accc.gov.au/content/index.phtml/itemId/838782/