Arla Gains Regulatory Clearance for Milk Link and Milch-Union Hocheifel Buys

In the case of Milk Link, the clearance is conditional upon the divestment of Milk Link's sole long-life milk processing facility located in Devon (UK). The Commission had concerns that the transaction, as originally notified, would have significantly reduced competition on the UK market for long-life milk by bringing together the two leading suppliers of this product in the UK.

1 Oct 2012 --- The European Commission has cleared under the EU Merger Regulation the proposed acquisition of the German dairy farmers' cooperative Milch-Union Hocheifel by fellow cooperative Arla Foods. The Commission concluded that the transaction would not raise competition concerns, because it would not significantly alter the market structure and the merged entity would continue to face sufficient competition.

The Commission's investigation examined the impact of the proposed transaction on a number of markets for dairy products in different countries where the merging parties' activities overlap.

This assessment was carried out at the same time as that of Arla's proposed acquisition of Milk Link in the UK. In this case, Arla offered remedies, namely the divestiture of Milk Link's long-life milk and dairy drinks business, including the transfer of brands and the production facilities located at Crediton (Devon), UK.

In view of these remedies, the Commission concluded that the proposed transaction would not raise competition concerns in the market for long-life milk in the UK.

In the other markets examined, the Commission also concluded that the transaction would not raise competition concerns.

The transaction was notified to the Commission on 24 August 2012.

The Commission examined the impact of the transaction on the markets for which the merging parties' activities overlap. These markets are the supply of fresh milk (Germany), long-life milk (Germany, Denmark, Sweden and the UK), long-life dairy cream, kondensmilch and long-life coffee cream (EU level, Germany, Denmark and Greece) and long-life flavored dairy drinks (EU level, Germany, Denmark and Sweden).

The Commission's investigation confirmed that the proposed transaction would not raise competition concerns on any of the markets examined as the increments in market share in most of the affected markets are limited and the merged entity will continue to face competition from a number of competitors in all affected markets.

Arla is a dairy cooperative owned by Danish, Swedish and German dairy farmers. It is active in the production and sale of a variety of dairy products with its main markets being Scandinavia, Germany and the UK.

MUH, a German farmers’ co-operative, is active in the production of a range of long-life milk products. MUH has no milk processing facilities outside Germany although it generates revenues from exports and has subsidiaries in France (sales), Luxembourg (procurement) and Belgium (procurement).

In the case of Milk Link, the clearance is conditional upon the divestment of Milk Link's sole long-life milk processing facility located in Devon (UK). The Commission had concerns that the transaction, as originally notified, would have significantly reduced competition on the UK market for long-life milk by bringing together the two leading suppliers of this product in the UK. The commitments offered by the parties address these concerns.

The Commission's investigation showed that the proposed transaction, as initially notified, would have combined the two leading suppliers of long-life milk in the UK, resulting in very high market shares. The Commission's investigation also indicated that many retailers in the UK have a UK only policy for long-life milk meaning that imports are not a viable source of supply for these customers and therefore do not constitute a competitive threat for the two companies.

In order to address these concerns, the parties offered to divest Milk Link's long-life milk and dairy drinks business, including the transfer of brands and the production facilities, located at Crediton (Devon), UK. In view of the remedies proposed, the Commission concluded that the proposed transaction, as modified, would not significantly reduce competition in the European Economic Area (EEA). This decision is conditional upon full compliance with the commitments.

The transaction was notified to the Commission on 9 August 2012.