UK dairy industry attacks OFT interference
competition watchdog, accusing it of unfairly targeting dairy
business deals and endangering the sector's growth.
Industry association Dairy UK voiced its concerns about the Office of Fair Trading (OFT) while giving evidence to Scotland's Food Supply Chain Inquiry, being conducted by the Scottish Parliament.
Kirk Hunter, director of Dairy UK Scotland, said: "In Scotland even minor acquisitions have been subject to scrutiny by the competition authorities.
"The stance of the OFT is creating confusion on how the industry is to carry forward necessary rationalisation and consolidation. The entire dairy supply chain needs to be able to develop the efficiencies of scale necessary to make the sector more internationally competitive."
His words follow on from similar criticism levied at the OFT by dairy industry officials last autumn.
The Rt. Hon. David Curry MP, chairman of Dairy UK, said the industry body would "meet the OFT to discuss the implementation of competition policy in the UK". He said it was time the watchdog's "focus on the dairy sector is reviewed".
Both the Milk Development Council and the National Farmers' Union (NFU) have recently warned that current investment in dairy research and development is far too low, leaving Britain's dairy sector lagging behind European and world competitors.
Greater consolidation, it is believed, would increase earnings in the UK dairy sector and free up more cash for research and development.
One Dairy UK official said many in the industry were "astounded" when the OFT referred processor Robert Wiseman's proposed takeover of Scottish Milk Dairies to the Competition Commission. The move prompted Wiseman to pull out of the deal.
Frustrations then boiled over after it emerged the OFT was investigating "retail pricing initiatives" between dairy processors and retailers. It is thought several deals have been done over the last few years to raise retail milk prices in order to pass more money down the supply chain.
The OFT warned the dairy industry in a letter last year that "price fixing agreements are among the most serious breaches of competition law". It said dairy farmers' difficulties were no excuse.
Conversely, the MDC said intense competition between the main processors, Arla UK, Dairy Crest and Wiseman, for supermarket contracts was mainly responsible for cuts to farmgate milk prices from April last year.