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28 June 2000
INQUIRY INTO THE SUPPLY OF FRESH PROCESSED MILK TO MIDDLE GROUND RETAILERS
IN SCOTLAND
COMPETITION COMMISSION CONSULTS ON POSSIBLE REMEDIES
The Competition Commission is inviting comments on a
statement of possible remedies relating to its inquiry into the supply
of fresh processed milk to middle ground retailers in Scotland. This follows
its earlier statement of 29 April in which it indicated the issues that
it wished to raise with Robert Wiseman Dairies PLC.
It is only in the event that the Commission makes any
findings against the public interest that it would be necessary to recommend
remedies.
It is setting out these hypothetical remedies now so
that interested parties will have as much time as possible to comment
on their likely effectiveness, costs and practicability, consistent with
maintaining the schedule for the inquiry.
The remedies in the attached statement
relate to the issues in the statement of 29 April, which is also attached.
The publication of this remedies statement is part of
the Commission’s initiative to be more transparent in its work.
Notes to Editors
1. A statement of possible remedies is normally
released before the Commission has reached any public interest conclusions
in an inquiry. The hypothetical remedies relate to matters that the investigating
group may find to operate against the public interest. Comments are invited
from interested parties to help the Commission assess the wider implications
of any recommendations it might wish to propose.
2. The inquiry into the supply of fresh processed milk
to middle ground retailers in Scotland is being carried out under the
monopoly provisions of the Fair Trading Act 1973, following a reference
made by the Director General of Fair Trading on 3 February 2000 (see OFT
press release 07/00).
3. Competition Commission News Release 21/00 of 2 May
set out the issues that the Commission wished to consider in the inquiry.
The Commission will hold further hearings before completing its report.
4. ‘Middle ground retailers’ are defined
in the Commission’s terms of reference as retailers other than:
- ASDA Group plc, Marks & Spencer plc, Safeway plc, J Sainsbury
plc, Somerfield Stores plc, Tesco plc and each of their subsidiaries,
and
- those whose sole business is the delivery of fresh processed milk
to households.
5. No conclusions will be reached about whether any
matters may be expected to operate against the public interest until the
Commission submits its report to the Secretary of State, on 2 November
2000.
6. Further information about the inquiry, and copies
of the issues and remedies statements can be obtained from the Commission’s
web site, www.competition-commission.org.uk/ref.htm.
7. Enquiries should be directed to:
Francis Royle, Press Officer Tel: 020 7271 0242.
REMEDIES STATEMENT
Introduction
1. On 28 April the Competition Commission wrote to
Robert Wiseman Dairies indicating the issues which it wished to raise
as part of its inquiry into the supply of fresh processed milk to middle
ground retailers in Scotland. These issues were summarised in a statement
that was made public on the following day. Yesterday, the Commission sent
a further letter to Wiseman, inviting it to comment on possible remedies
that could be recommended if, at the completion of the Commission’s
investigation, it considered that the company was operating against the
public interest.
2. This statement summarises the points on which views
are being sought. In particular, comments are invited on the likely effectiveness,
costs and practicability of the remedies that have been set out. It should
be clearly understood that the basis on which the points listed below
are being raised is entirely hypothetical. Sending such a letter is a
normal part of the Commission’s procedures at this stage in an inquiry.
It does not imply that the Commission has reached any conclusion as to
whether any behaviour by Wiseman operates, or may be expected to operate,
against the public interest. It is being published now to give interested
parties as much time as possible to comment on the possible remedies that
the Commission may consider, consistent with maintaining the schedule
for the inquiry.
Hypothetical remedies on which views are sought
3. The Commission invites views on possible remedies
under two broad headings: structural and behavioural.
Structural issues
4. A structural remedy could involve Wiseman divesting
itself of part of its processing capacity in Scotland and/or part of its
business with middle ground retailers. The company has been asked to describe
the facilities and capacity of each of its four Scottish processing sites;
to analyse what would be involved in converting the more specialised dairies
to enable them to process and package milk for sale to middle ground retailers
(including an estimate of any costs that an acquirer would have to meet);
and to indicate what proportion of middle ground retailers in Scotland
– in terms of numbers and by value of sales – lie within a 40
mile radius of each of them.
Behavioural issues
5. The Commission has been told that prices paid by
middle ground retailers for fresh processed milk have fallen significantly
since Express began operating in Scotland. It would like to consider ways
of ensuring that prices remain at around their current levels, in real
terms.
6. It has asked Wiseman to consider the implications
of:
- not increasing its average prices to this sector by more than some
objective criterion such as the change in RPI after allowing for any
change in the cost of raw milk;
- being required to maintain any price reductions given to customers
since December 1998 for a reasonable period of time - say for the next
three years;
- a straightforward price freeze, again, say, for three years;
- not discriminating between middle ground retailers; and
- the differential between Wiseman’s average prices to middle ground
retailers and to supermarkets – in each of the three regions of
Scotland into which milk supply divides: the Highlands and Islands,
Grampian and the rest –being no greater than at present.
7. Another possible remedy is that Wiseman should be
prohibited from acquiring any more processing plants in Scotland.
Responses
8. Comments are invited
on the hypothetical remedies and related points raised in this statement.
It would be helpful if responses could be sent to David Peel, Reference
Secretary, Competition Commission, New Court, 48 Carey Street, London,
WC2A 2JT (telephone 020 7271 0288, fax 020 7271 0203, e-mail david.peel@competition-commission.org.uk) by Tuesday, 25 July.
Last Revised 6/2000
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