As reported previously, eastAUSmilk and other players in the dairy industry have made multiple submissions to the Australian Competition and Consumer Commission urging that it attach conditions to the acquisition by Coles of two Saputo milk processing facilities, in Laverton (Victoria) and Erskine Park (New South Wales).
Our concern was twofold - one, that an integrated supply chain would give Coles unprecedented powers, and two, that the acquisition could, over time, substantially reduce competition for fresh milk, to the detriment of farmers. eastAUSmilk made it clear the industry needs more milk processor competition, not less.
As well as with ACCC, eastAUSmilk has repeatedly raised these issues with Commonwealth, NSW and Queensland governments.
ACCC initially released a Statement of Issues in July identifying preliminary concerns about Coles' bargaining position in the dairy supply chain, and the potential for reduced competition for raw milk.
The ACCC has now rejected the proposition that the acquisition would reduce competition, and that it needs to intervene. No conditions have been placed on the acquisition. The scope for ACCC to intervene was always narrow, restricted to the marginal impact on competition of the acquisition, and issues such as the community having ongoing access to locally sourced fresh milk, regional community resilience, fairness between big business and small, and so on, cannot be considered by ACCC.
On December 6, eastAUSmilk CEO Eric Danzi and government relations manager Mike Smith discussed the commission's conclusions with ACCC deputy chair Mick Keogh.
ACCC concluded the acquisition was unlikely to result in a substantial lessening of competition over the next five years, and noted Coles' conduct with dairy farmer suppliers was covered by the mandatory Dairy Code of Conduct and its interactions with processors was covered by the voluntary Food and Grocery Code of Conduct. It uses the five-year timeframe because it cannot predict industry conditions further ahead than that, with sufficient confidence.
It will release a statement of its reasons, probably early in the new year. eastAUSmilk will consider if there are further options open to us, to protect dairy farmers from negative outcomes of the acquisition. We hope other processors can use these developments to increase competition for milk supply in the Sydney region.
