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CMA issues clearance decision in Irish Dairy Board / FJ Need Foods merger

The Competition and Markets Authority published the full text of its decision on 28 April clearing the anticipated acquisition by Irish Dairy Board (UK) Limited of FJ Need Foods Limited. The CMA had cleared the merger at the end of March.

The parties overlap mainly in the supply of hard cheese in the food service sector in the UK and to a lesser extent in providing contract packaging services for cheese.

The CMA took a cautious approach towards defining the relevant market in relation to the supply of hard cheese deciding that the frame of reference should be narrow – based on the supply of hard cheese to food service customers – rather than the broader frame of reference to also include supply to retail customers. The narrower frame of reference was adopted because of mixed evidence received from suppliers in the industry about the extent of supply-side switching. The parties will hold a combined market share of 20-30% in this relevant market post-merger but the evidence indicated that a range of suppliers, from large players to smaller suppliers, will continue to constrain the parties post-merger since most customers multi source their requirements.

In relation to contract packaging services, the parties’ customers indicated that there would continue to be a sufficient level of choice of contract packagers post-merger.

The CMA also considered the vertical effects of the merger including the potential for input foreclosure of the supply of bulk cheese to wholesale packer and formatters and concluded that there were a number of credible alternative suppliers of bulk cheese to whom downstream cheese packers and formatters could switch in the event of a price increase.

The CMA decided that these constraints, taken together, were sufficient to ensure that the merger would not give rise to a realistic prospect of a substantial lessening of competition as a result of horizontal unilateral or vertical effects.

Maitland Walker LLP can advise on both the competition and transactional aspects of mergers. The Competition Law department has extensive expertise in considering whether it is necessary to notify the CMA of your proposed merger and in preparing the notification and dealing with the CMA’s investigation. Maitland Walker recently dealt with both the competition and corporate aspects of the acquisition of Ketchum Manufacturing Limited by Shearwell Data Limited and the  merger notification to the CMA (see article on the clearance of that merger by the CMA here).

To discuss any of the issues raised in this article please contact Julian Maitland-Walker or Sheree-Ann Virgin.