Completed acquisition by Dairy Crest Group plc of the dairy business of Midlands Cooperative Society Limited

Affected market: Milk and other dairy products

No. ME/1833/05

Please note that the full text of the decision can be downloaded from the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

The OFT's decision on reference under section 22 given on 8 September 2005. Full text of decision published 16 September 2005.

PARTIES

Dairy Crest Group plc (Dairy Crest) produces milk, cream, cheese, dairy spreads and other dairy products for supply to customers located mainly in Southern England and Wales.

Midlands Cooperative Society Limited (MCS) is active, inter alia, in the production of milk and cream at its dairy in Birmingham and the distribution and sale of these products to customers located mainly in the Midlands. In the financial year ended 22 January 2005, the UK turnover of MCS's dairy business was around £88.9 million.

TRANSACTION

On 16 May 2005 Dairy Crest acquired the dairy business and assets of MCS. MCS has retained its food and non-food stores and its other businesses. The statutory deadline in this case expires on 15 September 2005.

JURISDICTION

As a result of this transaction Dairy Crest and the dairy business of MCS have ceased to be distinct. The UK turnover of MCS's dairy business exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

THIRD PARTY VIEWS

The third parties (customers and competitors) contacted by the OFT in this case were generally unconcerned, although one customer raised some concern about the consolidation of smaller dairies; the customer did, however, identify a number of alternative suppliers in the region. DEFRA expressed the view that the merger would not result in a signification lessening of competition.

ASSESSMENT

The main area of overlap between the activities of Dairy Crest and MCS is the supply of fresh processed milk to middle ground and doorstep customers. The combined share of supply in respect of middle ground customers is not such as to raise competition concerns. Moreover, middle ground fresh milk customers contacted by us in this inquiry have indicated that there are a number of alternative dairies in the geographic area of overlap to which they could easily switch following a price increase. The overlap in the doorstep segment is limited, and a strong competitive constraint is expected to come from supermarket sales.

Dairy Crest and MCS both also supply bulk and non-bulk cream; the combined shares of supply do not raise competition concerns.

In the procurement of raw milk, the increment resulting from the transaction is small and the geographic areas in which the parties obtain raw milk are adjacent rather than overlapping. This indicates that the merger will not adversely affect dairy farmers in terms of the number of buyers for their milk.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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