The Australian Competition and Consumer Commission will not oppose Fonterra Co-operative Group Limited's proposed acquisition of National Foods Limited, subject to Fonterra providing acceptable court-enforceable undertakings including undertakings for the divestiture of certain assets, ACCC Chairman, Mr Graeme Samuel, said today.
"The ACCC was concerned by competition issues in the market for raw milk, fresh milk and flavoured milk in Western Australia", Mr Samuel said. "In particular, the ACCC was concerned that the merged entity would use its market power in the raw milk market to substantially lessen competition in the acquisition of raw milk as well as substantially lessening competition further downstream.
"The undertaking which Fonterra has offered is aimed at ensuring competition in the raw milk, fresh milk and flavoured milk markets in Western Australia as well as those markets that rely on the supply of raw milk in both the near future and in the longer term".
The ACCC carefully considered the competitive impact of the proposed acquisition in the relevant markets for raw milk, fresh milk, flavoured milk, fresh dairy produce including yoghurt and dairy desserts, cheese and cream. It conducted extensive market inquiries during its investigation into the merger. It consulted with Western Australian dairy manufacturers, farmers representative bodies and other industry groups, buyers of various dairy products and competing dairy producers.
"The ACCC notes that supermarkets pose considerable countervailing power over dairy product producers and that competition from the eastern states in Australia is likely to constrain the merged entity in the markets for yoghurt and dairy desserts, cheese and cream.
"Following the offer of court-enforceable undertakings by the parties, the ACCC is satisfied that its concerns will be addressed".
The reasons for this decision and the undertakings, excluding a confidential annexure, will be posted on the ACCC website, shortly.