ACCC queries MG sale plan

March 06, 2018

THE ACCC has raised a red flag about the proposed sale of Murray Goulburn to Saputo.

THE ACCC has raised a red flag about the proposed sale of Murray Goulburn to Saputo.

The Australian Competition and Consumer Commission (ACCC) said its sole concern was in relation to MG’s Koroit dairy plant in western Victoria, in particular the impact the acquisition will have on competition for farmers’ milk in the area.

The ACCC outlined its concerns in a Statement of Issues paper last week and is seeking responses from interested parties by March 13.

The ACCC said Saputo’s Allansford plant and MG’s Koroit plant would have over two thirds of the raw milk processing capacity in the south-west Victoria and south-east South Australia region.

The two plants currently acquire the majority of raw milk from dairy farmers in the area.

“While Saputo is proposing to acquire most of the Murray Goulburn business, our only concern is in relation to Murray Goulburn’s Koroit plant,” ACCC chair Rod Sims said.

“Our view is that Saputo owning the Koroit plant would substantially lessen competition for the acquisition of dairy farmers’ raw milk in the region.”

Fonterra is the only other major competitor with a processing plant in the region.

The ACCC’s concerns are Saputo and Fonterra would be more likely to offer lower prices if Saputo acquired Koroit, and there would be very limited alternatives for many farmers.

“When Murray Goulburn dropped its prices in 2015–16, Fonterra was quick to follow. Our analysis has shown that many farmers switched to Saputo in response, the only other major processor nearby,” Mr Sims said.

“We are concerned this transaction would ultimately lead to lower prices being paid to dairy farmers in the region.”

The ACCC says during its extensive consultations with farmers in the area, it heard from dairy farmers who just want the Saputo transaction to proceed.

“We understand Murray Goulburn faces an uncertain future, and that many farmers just want certainty after a tumultuous few years,” Mr Sims said.

“However, if the acquisition of Koroit by Saputo proceeds, our view is that dairy farmers in the region will be worse off and face lower raw milk prices in the longer run. It’s important to preserve competition in these markets so dairy farmers get a price for their product determined by healthy competition.

“The ACCC considers that Koroit would remain in the market, continue to operate, and would likely be acquired by another business if the Saputo acquisition does not proceed."

There are unlikely to be competition concerns in other regions where there is currently no overlap between Murray Goulburn plants and Saputo plants, or in downstream dairy product markets, such as fresh milk, butter, cheese and cream.

In a statement, MG said the SOI was not a final decision by the ACCC.

‘‘The ACCC will continue its review process and has announced 29 March, 2018 as the anticipated date for its final decision,’’ MG said.

‘‘The successful completion of the asset sale remains MG’s primary focus and MG will continue to work closely with Saputo and the ACCC to be able to achieve completion.’’

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