The UK Competition Commission announced today that it has sent a remedies letter to both Arla Foods and Express Dairies regarding their proposed merger. The commission said that it has not yet reached a conclusion as to whether the merger would operate against the public interest.
If an adverse decision is made, the Commission has indicated that it will make recommendations to the secretary of state as to how best to remedy any adverse effects. The commission has already identified a number of possible adverse effects that may arise as a result of the merger.
These include a reduction in the number of major liquid milk suppliers to national multiples - and possibly other large retailers - that would result in a substantial lessening of competition nationally and/or regionally.
In addition, the commission has questioned whether the merger would result in a reduction in the number of major liquid milk suppliers, and whether the merger would lead to a substantial lessening of competition in the supply to middle ground or doorstep customers in the UK.
There are also fears that the merger would have an adverse effects in the market for fresh processed milk because of its impact on farm-gate prices, wholesale prices and/or quality.
Possible remedies that the commission wishes to explore for these hypothetical adverse effects include the disposal of one or more dairies to one or more buyers approved by OFT. This would ensure that 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.
The commission said it will also explore whether prohibiting the merger would be a more appropriate response to any combination of the hypothetical concerns identified.