Australia’s competition regulator has pushed back a ruling on local supermarket Coles purchasing two milk processing facilities.
The Australian Competition and Consumer Commission (ACCC) was due to present its conclusions today (14 September) but is still gathering feedback from “parties” that had previously voiced concerns over the Coles-Saputo deal.
Coles, Australia’s second-largest supermarket chain, announced in April that it planned to acquire the two plants from the Canadian dairy giant. The transaction for the sites in Laverton North in Victoria and in Erskine Park in New South Wales was valued at C$95m ($70.2m today).
However, ACCC launched a review of the deal in May before publishing its preliminary findings in July, with the parties then given until 3 August to respond to those initial observations.
Australia’s competition regulator said in its timeline of proceedings that the ACCC is still awaiting “receipt of information from the parties” and will announce a new date to submit its conclusions “in due course”, declining to comment further when approached by Just Food.
The feedback from the concerned parties, said the ACCC in July, came from “a significant number of industry participants”.
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It suggested at the time that the deal would “result in a major structural change” in Australia’s dairy sector. If approved, the acquisition would be the first time a supermarket “owns and operates its own milk processing facilities”, the regulator said.
Currently, Coles acquires raw milk from farmers in Victoria and New South Wales. The retailer processes the milk at these plants under an arrangement with Saputo.
“For NSW dairy farmers, concerns have been raised that this acquisition may change Saputo’s incentives to continue acquiring raw milk in NSW. If Saputo does exit NSW as a result of the acquisition, this would leave limited competition in regions of NSW, which could result in farmers receiving lower prices for their raw milk,” Mick Keogh, the deputy chair of ACCC, said in July.
The ACCC is concerned Coles would have increased bargaining power that could lead to reduced competition at the wholesale level, affecting processors and farmers.
“Many industry participants have expressed concerns that the acquisition will result in Coles consolidating its private-label milk production, which would increase its bargaining power in negotiations with dairy processors and dairy wholesalers,” Keogh added.
Coles said at the time it would “continue to work constructively” with the ACCC but insisted the grocer “sees no lessening of competition in any relevant markets”.
“…Coles already acquires approximately 80% of the volumes at the facilities and will provide milk processing services to Saputo Dairy Australia under a tolling arrangement,” Coles CEO Leah Weckert said. “We remain confident that any outstanding concerns can be addressed so that the proposed transaction can proceed to completion.”