Subject to Condition: EC Allows Dairy Merger

EU - The European Commission has cleared under the EU Merger Regulation the proposed merger between Campina and Friesland Foods, both Dutch companies active in a range of dairy product markets, subject to conditions.
calendar icon 18 December 2008
clock icon 3 minute read

The Commission's in-depth investigation, opened in July 2008 indicated that the concentration, as originally notified, would have raised competition concerns in the markets for the procurement of raw milk, fresh dairy products and cheese in The Netherlands and for long-life dairy drinks in The Netherlands, Belgium and Germany.

To remedy the Commission's concerns, the merging parties offered to divest Friesland Foods' fresh dairy product business and a part of Campina's cheese business and two Campina brands for long life dairy drinks. They also offered remedies to ensure access to raw milk in The Netherlands. In light of these commitments, the Commission concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Competition Commissioner Neelie Kroes said: “We have been able to approve this significant concentration in the Dutch dairy sector because the parties offered substantial remedies, designed to keep these markets competitive and to ensure that consumers will not be harmed by the merger”.

Both Campina and Friesland Foods are dairy cooperatives active primarily in the Netherlands and other EU Member States. Their activities involve several markets along the dairy food product chain, from the procurement and processing of raw milk to the production of a variety of dairy and non-dairy products.

The Commission's investigation showed that the merger, as initially notified, would have resulted in a significant impediment to effective competition in the Dutch markets for the procurement of raw milk, fresh basic dairy products, value added yoghurt and quark, fresh flavoured dairy drinks, fresh custard and porridge and cheese as well as in the market for long-life dairy drinks in The Netherlands, Belgium and Germany.

With a view to removing the Commission's concerns, the merging parties made the commitment to divest Friesland Foods' fresh dairy product business (including the transfer/licensing of brands and a plant in Nijkerk) and one of Campina's cheese plants, located in Bleskensgraaf. They also made the commitment to divest two Campina brands for long-life dairy drinks.

Additionally, they offered remedies to ensure access to raw milk for the fresh dairy and cheese businesses to be divested by the parties as well as for their competitors in the fresh dairy and cheese markets in The Netherlands. These commitments include three elements. Both divested businesses would in a first stage be able to source raw milk from the merged entity under a transitional supply agreement. Subsequently, a foundation (Dutch Milk Fund) would be set up to ensure access to raw milk for a maximum yearly volume of 1.2 billion kg of raw milk to the divested businesses and other competitors. This Milk Fund would remain in place until more structural changes in the market for raw milk were achieved. The merged entity, FrieslandCampina, would reduce exit barriers for dairy farmers who might wish to leave the new cooperative. This third measure would aim at creating a source of Dutch raw milk which was independent from FrieslandCampina and would thus provide a long-term structural solution.

The Commission concluded that the commitments were sufficient to remedy its initial concerns. The Commission's decision is conditional upon full compliance with the commitments.

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