Arla facing Danish probe

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Related tags: Arla foods, Denmark

The Competition Authority in Denmark is investigating claims by a
smaller dairy group that Arla Foods, the country's biggest milk
group, has offered milk at unreasonably low prices to the Dansk
Supermarked retail chain.

Arla Foods' head office in Viby, Denmark was visited by the Danish Competition Authority last week, a surprise visit prompted by accusations of restrictive trade practices.

Arla​ said that the visit had been prompted by the lodging of a complaint by another Danish dairy group, Hirtshals Co-operative Dairy, regarding Arla's relationship with one of the country's leading supermarket chains, Dansk Supermarked.

Speaking to the daily newspaper Berlingske Tidende​, the chairman of Hirtshals, John Bak, said that he had filed the complaint because he believed that Arla was offering its milk to Dansk Supermarked at artificially low prices in a bid to price its competitors out of the market.

"We cannot prove it, but that's the way it looks,"​ Bak told the paper.

Arla Foods said it would co-operate fully with the Competition Authority in its investigation.

"For many years, Arla Foods has trained its staff in competition issues,"​ said spokesperson Astrid Gade Nielsen. "I find it hard to imagine that we should have any problems with the regulations."

Arla Foods Denmark was created in 1999 through the merger of MD Foods, itself recently bolstered as market leader through a merger with number two player Kløver Mælk, and Sweden's Arla Foods. The company accounts for around 90 per cent of the Danish milk market.

While Sweden and Denmark are the most important markets for Arla, accounting for roughly 25 per cent of sales each, the UK is now becoming of equal importance, especially following the recent merger with Express Dairies there.

Ironically, Express - or rather its Scottish subsidiary Claymore Dairies - has been the instigator of a number of similar cases in the UK, accusing it main rival, Robert Wiseman Dairies, of exerting too much power over middle-ground operators (i.e. not supermarkets or wholesalers).

But Wiseman has been cleared every time, and indeed Express itself was investigated by the Competition Commission on this very same issue as part of the merger approval process.

Although the Commission found no evidence to suggest that the merger of Arla and Express would have any adverse effect on this market, the dominant position that the company will now hold in the UK milk market could give rise to allegations of abuse in the future.

Related topics: Manufacturers, Arla Foods

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