NFU slams OFT for Wiseman interference
industry for the Office of Fair Trading to intervene in Robert
Wiseman's bid for Scottish Milk Dairies, says the National Farmers'
Union.
Gwyn Jones, NFU dairy board chairman, criticised the Office of Fair Trading (OFT) for referring the proposed takeover deal to the Competition Commission.
The OFT move prompted Wiseman, one of the UK's top three dairy processors, to drop its bid and Graham's Dairies has now swooped in to take its place.
"We find this decision incredibly frustrating because it is precisely the kind of move we believe should be encouraged if we are to achieve the economies of scale required to compete with the rest of Europe," said Jones after presenting the NFU's Vision for the Dairy Industry report to government representatives.
The UK's Milk Development Council recently highlighted Britain's growing trade deficit in dairy products (reaching £744m during 2004) to show that the country was importing too many added value added products while relying too much on lower value commodity exports like powders and bulk cream.
It said Britain had fallen behind the rest of Europe in higher value dairy sectors.
"It is time the OFT recognised that the UK's liquid milk market is part of the European market. Further consolidation is vital to the future prosperity of our industry and it must be allowed to happen," said Jones.
He added that the OFT's decision on the Wiseman bid only reinforced the perception in the dairy industry that the OFT "is opposed to further consolidation in the sector".
The OFT said it wanted to bring in the Competition Commission because Wiseman is already Scotland's biggest milk supplier and its takeover of Scottish Milk Dairies may have caused price rises for middle ground customers.
The referral, however, also came as the OFT was trying to reassert its authority, after the Competition Appeals Tribunal (CAT) accused it of bungling an earlier investigation involving Wiseman in Scotland.
Competition regulation has proved a tricky business on the UK dairy market. One senior industry analyst said that the top two UK dairy processors, Dairy Crest and Arla, did not actually compete on fresh milk supplies in any one particular area of the UK.
But, the possibility of this breeding a concentration of market power has almost become seen as a necessary evil because someone needs to supply the milk.
The NFU's Jones told government representatives that more consolidation was the only way forward. The NFU has also advocated the formation of a school of innovation using pooled industry resources to inspire much-needed research and development.
