CMA accepts remedy in dairy merger

The Competition and Markets Authority (CMA) has accepted a remedy to resolve competition concerns arising from Müller’s proposed purchase of Dairy Crest’s dairy operations.

On 26 June 2015, the CMA announced it would consider in detail undertakings proposed by Muller UK & Ireland Group LLP (Müller) instead of referring the case for an in-depth merger investigation.

The CMA found concerns in the supply of fresh liquid milk in the catchment area of Dairy Crest’s Severnside dairy, especially in the South West and Wales. Under the undertakings offered by Müller, it has agreed to arrangements which will provide for the expansion of an existing supplier to serve national grocery retailers with fresh liquid milk in this area.

Under these arrangements, Müller has agreed to sell to Medina Dairy Limited (Medina Dairy) the option to require Müller to process up to 100 million litres of milk each year in Dairy Crest’s Severnside dairy for supply to national grocery retailers. The option is for a period of at least 5 – and up to 8 – years.

The CMA approved Medina Dairy as purchaser following an extensive review of its business plans, existing dairy facilities, financial resources and strategy to supply retailers. The CMA is confident that, with its financial backing and experience, Medina Dairy is in a good position to begin supplying large retailers and continue investing in this area.

As a result of the CMA’s acceptance of these undertakings, Müller’s proposed acquisition of Dairy Crest’s dairy operations will not be referred for an in-depth phase 2 investigation.

Sheldon Mills, CMA Senior Director of Mergers and decision-maker in this case, said:

“The dairy processing industry has faced a number of significant challenges in recent years and we believe that this outcome is good for the dairy industry and the retailers. The remedy addresses in a clear-cut manner the competition concerns we had with the merger in especially the South West and Wales regions.

“It results in the accelerated entry of a competitor, Medina Dairy, which has the necessary financial backing, commitment and capability to succeed in serving large national retailers. We consulted extensively and found widespread backing in the industry for this solution.

“Resolving this merger investigation now brings real benefits to the dairy industry, including farmers, as it provides certainty and allows the businesses involved and their customers to focus on bringing British dairy products to consumers at a competitive price.

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