ACCC raises concerns over Murray Goulburn’s WCB takeover

Posted by Josette Dunn on 23rd April 2010

The Australian Competition and Consumer Commission (ACCC) has released a Statement of Issues in relation to the proposed acquisition of Warrnambool Cheese and Butter Factory Company (WCB) by Murray Goulburn.  A Statement of Issues published by the ACCC is not a final decision about a proposed acquisition, but provides the ACCC’s preliminary views, drawing attention to particular issues of varying degrees of competition concern, as well as identifying the lines of further inquiry that the ACCC wishes to undertake.


Preliminary view on competition issues

The ACCC considers that if the merged firm were to reduce the prices it offers for raw milk and/or other non-price benefits post-acquisition, it would be unlikely that competing processors would be able to compete vigorously to acquire raw milk from farmers who may otherwise wish to switch away from supplying the merged entity. This compares to the present situation where it appears that WCB provides a strong competitive constraint.

Therefore, the ACCC is concerned that the proposed acquisition would substantially lessen competition for the acquisition of raw milk from farmers in the relevant markets within South Australia and Victoria. The potential effects in the relevant markets include:

  • A significant reduction in farm gate prices paid to farmers for raw milk; and
  • Reduced competition in the offer of non-price terms such as finance, field advice services and discounted hardware and grain supplies.

Market inquiries have also raised a concern that post-acquisition, Murray Goulburn will have the ability and incentive to increase the price of bulk cream supplied to customers.

Next steps

The ACCC will finalise its view on this matter after it considers market responses invited by this Statement of Issues.

The ACCC now seeks submissions from market participants on each of the issues identified in this Statement of Issues and on any other issue that may be relevant to the ACCC’s assessment of this matter.

Submissions are to be received by the ACCC no later than 7 May 2010. The ACCC will consider the submissions received from the market and the merger parties in light of the issues identified and will, in conjunction with information and submissions already provided by the parties, come to a final view.
The ACCC intends to publicly announce its final view by 3 June 2010.