Acquirer: Craig Moystn Holdings Pty Ltd; Target: George Weston Foods Limited

Summary

Craig Moystn Holdings Pty Ltd ("CM") and George Weston Foods Ltd ("GWF") have entered into a Co-operative Pork Processing Agreement ("Agreement"). The Agreement will commence in February 2004. Under the Agreement, CM will process GWF's pigs at its Linley Valley abattoir Western Australia. Prior to the commencement of the Agreement, GWF will close its Western Australian abattoir. The Agreement fell for consideration by the Mergers & Asset Sales Branch of the Commission under s45 of the Trade Practices Act.

Market definition

The Western Australian market for pig processing services
The national market for smallgoods
The Western Australian market for fresh meat (pork was considered to compete with other meats including chicken, beef and veal)

Competition analysis

Both GWF and CM operate smallgoods businesses with national distribution in addition to fresh pork businesses. At present, both operate abattoir facilities in Western Australia, servicing their own pig processing needs and those of third parties. Between them GWF and CM presently provide approximately 90% of pig processing services to third parties in WA.

The Agreement was considered unlikely to result in a substantial lessening of competition in the pig processing market owing to the potential for expansion by smaller abattoirs with pig processing capacity in response to a price rise (including by way of vertically integrated facilities offering services to third parties). It was also relevant to the Commission's analysis of the Agreement that GWF's decision to close its WA abattoir was made unilaterally, and not agreed between the parties. As such, it was not possible to consider that the loss of GWF's plant as a competitive force in the market was a result of an agreement between the parties within the meaning of s45.

With regard to downstream markets for fresh meat, it was considered that although the agreement might result in the parties having some knowledge of each other's pig processing volumes and costs, a number of factors would act to guard against the possibility of the parties engaging in co-ordinated conduct. These included the fact that processing costs amounted to only a small portion of the costs of downstream products such as pork and smallgoods. Accordingly, such information as would be available to the parties under the Agreement would be insufficient to provide a basis for co-ordinated behaviour in downsteam markets. Further, the fact that the parties faced competition in both the fresh meat and smallgoods markets was taken to imply that any attempt by the parties to increase prices would result in lost sales to competitors.

Guidelines thresholds

Unknown

Imports above 10%

N/A

Initiation

Parties

ANZSIC code

2111