ACCC flags competition concerns with Coles’ move to acquire dairy plant from Saputo

Australia’s competition watchdog has raised concerns with Coles acquiring and owning its own milk processing operations. The Australian Competition and Consumer Commission on Thursday labelled the supermarket chain’s attempt to buy Saputo’s processing plants in NSW and Victoria a threat to the industry which had to the potential to lessen competition. In a statement, the ACCC said a number of witnesses have said the move would create major structural changes and would greatly increase Coles’ bargaining power when buying wholesale raw milk. ACCC deputy chair Mick Keogh said the regulator is concerned about the flow on effects, particularly around price points sold for milk to the supermarket. “Many industry participants have expressed concerns that the acquisition will result in Coles consolidating its private label milk production, which would increase its bargaining power in negotiations with dairy processors and dairy wholesalers,” Mr Keogh said. The ACCC is particularly concerned what it means for NSW and regional producers if processing plants. There are also concerns over the impact it could have on the production of raw milk in Queensland. “For NSW dairy farmers, concerns have been raised that this acquisition may change Saputo’s incentives to continue acquiring raw milk in NSW,” Mr Keogh said. “If Saputo does exit NSW as a result of the acquisition, this would leave limited competition in regions of NSW, which could result in farmers receiving lower prices for their raw milk.” In a statement, Coles said it would work with the ACCC but denied the acquisition would hamper competition in the regions. “From Coles’ perspective, we see no lessening of competition in any relevant market, noting that Coles already acquires approximately 80 per cent of the volumes at the facilities and will provide milk processing services to Saputo Dairy Australia under the tolling agreement,” Coles chief executive Leah Weckert said. “We remain confident that any outsourcing concerns can be addressed so that the proposed transaction can proceed to completion.” Saputo is a Canada-based company.