Fonterra Co-operative Ltd - proposed acquisition of Nestle Australia Ltd's Dennington (Vic) processing plant and associated exclusive milk component supply agreement with Nestle Australia Ltd.

Summary

Fonterra Co-operative Ltd - proposed acquisition of Nestle Australia Ltd's Dennington (Vic) processing plant and associated exclusive raw milk and milk component supply agreement with Nestle Australia Ltd.

Market definition

1. The Victorian market for the supply of raw milk to processors; and
2. The national market for the manufacture and wholesale of dairy ingredients.

Competition analysis

On 19 July 2005, the ACCC decided not to oppose the proposed acquisition of Nestle Australia Ltd's Dennington (Vic) processing plant and an associated exclusive raw milk and milk component supply agreement with Nestle Australia Ltd, by Fonterra Co-operative Ltd. It appears that dairy farmers have a number of alternate milk acquirers to which they could switch supply, such as Murray Goulburn, WCB, Tatura and Parmalat. The ACCC also considered that given Nestle's small market share in relation to its external sales of dairy ingredients (primarily milk powders), coupled with the countervailing power of Fonterra's customers, which include large agricultural goods exporters and national supermarket chains, the proposed acquisition is unlikely to substantially lessen competition in the relevant markets pursuant to section 50 of the Act.

Initiation

Parties