Commission clears SIDF to acquire West Coast companies
Published04 Jul 1997
The Commerce Commission yesterday cleared Christchurch-based South Island Dairy Farmers Ltd (SIDF) to acquire the town milk businesses of two West Coast companies, Scenicland Milk & Cream Ltd and Westport United Dairies Ltd.
Commission Chairman, Dr Alan Bollard, said that the Commission was satisfied that, should the acquisitions go ahead, SIDF would not acquire or strengthen a dominant position in any market.
Scenicland and Westport United are the two smallest town milk processors in the South Island. Both already supply town milk under SIDF's "Meadow Fresh" brand (as franchisees) to the West Coast and Buller regions respectively.
Once the acquisitions are implemented, the West Coast would be supplied with "Meadow Fresh" milk from SIDF's Canterbury plant. An independent company with no existing interests in town milk supply, Westland Co-operative Dairy Company Ltd, would acquire the raw milk currently produced by the suppliers to Scenicland and Westport United, and use it for the manufacture of dairy products for export.
The Commission reviewed the likely effects of the acquisitions on two markets: the acquisition/supply of unprocessed milk and the processing and wholesale supply of town milk.
The proposals would have no material impact on the market for the supply and acquisition of unprocessed milk. SIDF will not acquire any of the raw milk that now goes to Scenicland and Westport United.
SIDF would increase its share in the market for processing and wholesale supply in the South Island by about five percentage points to 66 percent. Despite SIDF's large share, the Commission considers that this market would remain highly competitive, with some major independent players remaining.
The existing town milk processors generally have the ability to expand production, while new entry into the market continues to be possible. Supermarkets would further constrain SIDF through their significant buying power.
"Considering all these factors the Commission concluded that SIDF would not acquire or strengthen a dominant position in any market, should the acquisitions go ahead," Dr Bollard said.
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any markets. Parties can apply for a clearance, which will be granted if the Commission is satisfied that dominance is not acquired or strengthened.
