Saputo decision delayed
The Australian Competition and Consumer Commission has announced a delay in presenting their findings, on the proposed acquisition of two Saputo milk processing plants by Coles.
They were due to present their final findings on the proposed acquisition on Thursday 14 September, but have delayed their report indefinitely, pending receipt of further information from the parties, i.e. Coles and Saputo.
EastAUSmilk Chief Executive Officer Eric Danzi said that eastAUSmilk had several times during the ACCC review made submissions raising possible consequences of a completely unregulated acquisition. eastAUSmilk had urged the ACCC to ensure, if the acquisition proceeded, that conditions were attached to it which protected dairy farmers and other milk processors from the effects of reduced competition which would arise.
In July this year, ACCC published a Statement of Issues outlining their competition concerns and asked of further submissions.
The two milk processing plants in question are at Laverton North in Victoria and Erskine Park in New South Wales, and the ACCC expressed serious concerns at reduced competition in the central coast area of New South Wales and impacts on other processors. In eastAUSmilk’s view, this impact could be felt from central NSW up into southern Queensland.
While many NSW members of eastAUSmilk have a good working relationship with Coles, some dairy farmers are concerned that if Coles owns the NSW facility it could impact where northern NSW and southern Queensland milk is processed, and hence the viability of production.
The ACCC review is only part of the story, though. Their review is conducted on very narrow grounds – the incremental change to competition in the market, caused by the proposed acquisition.
They are not allowed to:
consider social aspirations shared by all Australians – ongoing access to locally sourced fresh milk, a vibrant dairy industry, regional community resilience, fairness between big business and small, and so on,
address the total effect on competition that the acquiring company will have, nor
treat this as a precedent for agricultural supply chain vertical integration.
The ACCC say they will announce a revised decision date in due course.
Mike Smith, eastAUSmilk Government Relations Officer
Coles and Saputo Sage Continues
Submissions to the Australian Competition and Consumer Commission, on their concerns about the proposed acquisition of Saputo milk processing plants by Coles, closed on 3 August. The ACCC currently propose to make their final findings by 14 September.
In their statement of issues published in July, ACCC raised several areas of concern. They believe it is possible that sale of the Erskine Park (NSW) facility could see significantly less competition in the market for fresh milk, in several regions of NSW, and they are also concerned at the impact on the dairy industry if Coles decides to move processing from further north, or elsewhere, to the Erskine Park facility.
eastAUSmilk has made a submission in response to the concerns raised by the ACCC, and stressed they are not trying to force Saputo to hang onto milk processing plants they don’t want, nor that Coles will harm the dairy industry recklessly. Rather, the eastAUSmilk submission stressed that the competitive advantage which would be enjoyed by Coles if they bought the plants, and the production opportunities they represent, would most likely see Coles make changes to their operations which could drastically impact markets as far north as southern Queensland.
The solutions proposed by eastAUSmilk focused on keeping competition in the NSW market for fresh milk, by encouraging Saputo to go to market with their plants, to see if other milk processors are interested, or alternatively encouraging a joint venture between Coles and another processor or attach conditions to the sale which protect competition. In all cases, eastAUSmilk urged that the Dairy Industry Code be updated to address both this proposed purchase, and any other proposals for vertical integration in the industry.
eastAUSmilk has offered to work with ACCC to develop each of these proposals, because any solution will work better if it has dairy farmer input.
Mike Smith, eastAUSmilk Government Relations Manager
Australian Competition and Consumer Commission has concerns about Coles
Following submissions from eastAUSmilk and other industry participants, the Australian Competition and Consumer Commission on 20 July published a statement setting out the issues they are concerned about, with Coles’ proposal to buy two milk processing plants from Saputo.
The ACCC noted the proposed acquisition may lead to Saputo exiting markets for the acquisition of raw milk in NSW, thereby substantially lessening competition for the acquisition of raw milk in those markets.
They also noted the proposed acquisition may substantially lessen competition by giving Coles the incentive and ability to harm or frustrate competitor businesses at various points of the dairy supply chain.
The ACCC noted a significant number of industry participants had raised strong concerns about the proposed acquisition, particularly given it will result in a major structural change as the first time a supermarket has its own milk processing facilities.
Their full statement can be downloaded from the ACCC Government website. Issues of concern to the ACCC are discussed in more detail in the ACCC's full statement.
While many NSW members of eastAUSmilk have a good working relationship with Coles, some Queensland dairy farmers are concerned that if Coles owns the NSW facility it could impact where Queensland milk is processed, and hence the viability of some Queensland production.
The ACCC Review is only part of the story, though. Their review is conducted on very narrow grounds – the incremental change to competition in the market, caused by the proposed acquisition. They are not allowed to:
consider social aspirations shared by all Australians – ongoing access to locally sourced fresh milk, a vibrant dairy industry, regional community resilience, fairness between big business and small, and more,
address the total effect on competition that the acquiring company will have, nor
treat this as a precedent for agricultural supply chain vertical integration.
EastAUSmilk is likely to make further submissions to ACCC about the issues they have raised.
Mike Smith, eastAUSmilk Government Relations Manager
Visit to the ACCC
EastAUSmilk Chief Executive Officer Eric Danzi and Government Relations Manager Mike Smith met with Australian Competition and Consumer Commission in Sydney last week, to discuss the proposed purchase by Coles of Saputo processing plants in Laverton North (Victoria) and Erskine Park (New South Wales). The ACCC is investigating the impact on competition of the proposed acquisition.
Unfortunately, the ACCC’s investigation is very narrow, and pays zero attention to the aspirations shared by all Australians – ongoing access to locally sourced fresh milk, regional community resilience, fairness, and the like. They are also unable to take account of the appalling record of the major retailers in treating dairy farmers like serfs.
EastAUSmilk has made a strong submission opposing the acquisition, and the discussion with ACCC focussed on the content of what the submission said.
Politicians in Queensland, New South Wales and Federally will be actively pressed by eastAUSmilk to ensure the acquisition is blocked.
Errol Gerber and Joe Bradley, both eastAUSmilk District Councillors, plus Government Relations Manager Mike Smith, showed Queensland’s Minister for Agricultural Industry Development and Fisheries Mark Furner around Errol’s Clarendon dairy farm last week.
As well as showing the Minister over farm operations, the eastAUSmilk bent the Minister’s ear about a very wide range of topics, amongst which Joe was able to talk about his experience with Queensland Government dairy industry programs, particularly taking up smart collars for monitoring individual and herd well-being.
Discussion ranged over Tick Virus vaccine supplies (the Minister told us his department promises they will be available from next week), farmgate pricing concerns, industry resilience & drought/disaster preparation, improvements to various Government programs, and Coles’ proposed purchase of Saputo processing plants. During discussions the Minister mentioned his grandfather was a dairy farmer, and he had spent time on the property back in hand-milking days.
Mike Smith, Government Relations Manager eastAUSmilk