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37/03
29 August 2003
ARLA/EXPRESS MERGER
INQUIRY: REMEDIES STATEMENT
The Competition Commission
(the Commission) has sent a remedies letter to the main parties,
Arla Foods amba and Express Dairies plc, on a hypothetical
basis.
The Commission has not
yet reached conclusions on any aspect of the inquiry, in particular
as to whether the merger would operate, or may be expected
to operate, against the public interest. If it does reach
an adverse finding on the merger, however, the Commission
will wish to make recommendations to the Secretary of State
as to measures which would remedy the adverse effects. This
statement concerning possible remedies is being made public
in order to enable interested parties to comment on the likely
effectiveness and practicality of the measures envisaged.
Any such comments should be sent to the Commission by close
of business on Friday 5 September.
Hypothesis on Possible
Adverse Effects
As previously set out in
the issues letter of 31 July, the Commission has identified
a number of possible adverse effects that may arise as a result
of the merger. The hypotheses are that:
A reduction in the number
of major liquid milk suppliers to national multiples –
and possibly other large retailers – would result in
a substantial lessening of competition nationally and/or regionally.
A reduction in the number
of major liquid milk suppliers would be expected to bring
about such an increase in concentration in the market or markets
in GB for fresh processed milk as to result in coordinated
behaviour.
The merger would lead to
a substantial lessening of competition in the supply to middle
ground or doorstep customers in any part of GB.
The merger would have adverse
effects in the market for fresh processed milk because of
its impact on farm-gate prices, wholesale prices and/or quality
Possible Remedies
The possible remedies which
the Commission wishes to explore for these hypothetical adverse
effects are as follows:
(a) Disposal of one or
more dairies to one or more buyers approved by OFT on the
basis of criteria to ensure the buyer or buyers would be strengthened
as regional and/or national supplier(s) so as to maintain
the competitiveness of the relevant market or markets.
(b) If lack of access to
depots presents a barrier to entry, disposal of one or more
depots to one or more buyers approved by the OFT.
(c) If there are middle
ground customers who have specific requirements which can
be met by fewer suppliers following the merger and the costs
of distribution would deter other suppliers, a requirement
for any suitable liquid milk supplier or suppliers to be given
access to the parties’ milk distribution network.
(d) Any other structural
or behavioural remedies that the parties suggest.
The Commission will also
explore whether prohibiting the merger would be a more appropriate
response to any combination of the hypothetical concerns identified.
Responses
Comments should be sent
to the Inquiry Secretary (Room 610), Competition Commission,
New Court, 48 Carey Street, London WC2A 2JT (telephone 020-7271-0151,
fax 020-7271-0367), e-mail mary.sinfield@competition-commission.gsi.gov.uk,
by close of business on Friday 5 September 2003.
Notes to Editors:
1. The reference concerning
the proposed acquisition by Arla Foods amba of Express Dairies
plc was made under the Fair Trading Act 1973 on 7 July 2003.
(See DTI Press Notice P/2003/394)
2. On 10 June 2003, the European Commission
referred this proposed merger to the UK competition authorities
under Article 9 of the EC Merger Regulation (ECMR). Article
9 (6) of the ECMR imposes a four month deadline from the EC’s
referral for a member State’s competent authorities
to publish any report or announce their findings on examination
of the concentration in question. Under Article 7 of the Implementing
Regulation (Regulation 447/98/EC), that period will expire
on 15 October 2003.
3. The issues statement for the inquiry was
set out in the Commission’s News Release (29/03) 1 August
2003.
4. Further information can be obtained from
the Commission’s website at http://www.competition-commission.org.uk
5. Enquiries should be directed to Francis Royle,
Press Officer, Tel: 0207 271 0242
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