Commission Decision of 07/11/2011 declaring a concentration to be compatible with the common market (Case No COMP/M.6348 - ARLA FOODS / ALLGAULAND) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)
| Published date | 07 November 2011 |
| Subject Matter | Competition,Concentrations between undertakings |
Commission Decision of 07/11/2011 declaring a concentration to be compatible with the common market (Case No COMP/M.6348 - ARLA FOODS / ALLGAULAND) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)
|EUROPEAN COMMISSION |
Brussels , 7.11.2011
C(2011) 8125 final
In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. | |Public version |
| | |
| |MERGER PROCEDURE |
|To the notifying party |
Dear Sir/Madam,
Subject: Case No COMP/M.6348 – ARLA FOODS/ ALLGÄULAND Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004 [1]
1. On 15.09.2011, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which the undertaking Hansa-Milch AG ("Hansa", Germany) belonging to Arla Foods Amba ("Arla", Denmark) acquires within the meaning of Article 3(1)(b) of the Merger Regulation control of the whole of Allgäuland-Käsereien GmbH and AL Dienstleistungs-GmbH (together referred to as "Allgäuland", Germany) by way of purchase of shares. [2] (Arla and Allgäuland are designated hereinafter as the "Parties".)
I. THE PARTIES
2. Arla is a dairy cooperative owned by Swedish and Danish dairy farmers and, with effect from January 1, 2011, also indirectly owned by German dairy farmers who are members of Hansa-Milch eG, the latter being a corporate member of Arla. The company is active in the production and sale of a variety of dairy products.
3. Allgäuland consists of the German companies Allgäuland-Käsereien GmbH and AL Dienstleistungs-GmbH and its subsidiaries. Allgäuland is mainly a cheese dairy but also has other activities on various fresh dairy product markets. Geographically Allgäuland is situated in the southernmost part of Germany.
4. The six German cooperative societies Allgäuland Käsereien eG, Allgäuer Bergbauern-Milch Sonthofen-Schönau eG, Milchwerk Donau-Alb eG, Milchwerke Bad Wörishofen eG, Central-Molkerei Augsburg eG, Butterwerk Langenau eG ("the Dairy Cooperatives") and the German cooperative society Allgäuer Emmentalerkäserei Leupolz eG jointly hold 97.82% of the share capital of Allgäuland-Käsereien GmbH, none of them exceeding an owner's share of 25%. The remaining 2.18% of the share capital is held by the German dairy company Milei GmbH ("Milei", Germany). The Dairy Cooperatives hold the entire share capital of AL Dienstleistungs-GmbH, none of them exceeding an owner's share of 25%.
II. THE OPERATION
5. Arla, through its subsidiary Hansa-Milch AG, will acquire sole control over Allgäuland. It will purchase 97.82% of the shares in Allgäuland-Käsereien GmbH from the six Dairy Cooperatives and from the dairy cooperative Allgäuer Emmentalerkäserei Leupolz eG. In addition, Hansa-Milch AG will also acquire 100% of the shares in AL Dienstleistungs-GmbH from the six Dairy Cooperatives. [3]
III. CONCENTRATION
6. The proposed transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.
IV. EU DIMENSION
7. The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 000 million [4] (in 2010, the combined turnover of all the undertakings concerned was over EUR […]). Each of them has a EU-wide turnover in excess of EUR 250 million (Arla: EUR […], Allgäuland: EUR […]) and only Allgäuland achieves more than two-thirds of its aggregate EU-wide turnover within one Member State, namely Germany. The notified operation therefore has an EU dimension.
V. PROCEDURE
8. After having been informed that based on the initial results of the market investigation it could not be excluded at that stage of the procedure that the transaction might raise serious doubts as to its compatibility with the internal market with regard to whey protein concentrate, the Parties offered commitments on 13 October 2011 with a view to remove possible serious doubts. A modified version of these commitments was submitted to the Commission on 24 October 2011. However, given that the further market investigation demonstrated that the transaction does not raise serious doubts as to its compatibility with the internal market, the commitments were found to be unnecessary.
VI. COMPETITIVE ASSESSMENT
9. The activities of Arla and Allgäuland give rise to horizontal overlaps in the procurement of raw milk, fresh products (milk, liquid dairy cream, yoghurt and quark), longlife products (milk, liquid dairy cream), butter, cheese and whey. These overlaps are discussed in section A.
10. In addition, the transaction raises a potential horizontal coordination issue concerning markets for the production of whey-based products namely lactose, permeate and whey protein concentrate - because of a minority shareholding of Allgäuland. This horizontal coordination issue is dealt with in section B.
A. Arla and Allgäuland
A.I. Relevant product markets
A.I.1. Procurement of raw milk
11. Raw milk is collected from the farms and delivered to the dairies for further processing. It has a perishable nature, since it has undergone no treatment other than cooling.
12. The Commission has found in a previous case that the procurement of raw milk should be split into two separate markets: 1) the procurement of conventional milk, and 2) the procurement of organic milk. [5] In relation to the German market, the Commission has so far left open whether the raw milk market should be split into conventional and organic raw milk markets. The Parties agree with this market definition.
13. The precise definition can be left open in the present case because, regardless of the definition used, the transaction does not raise serious doubts as to its compatibility with the internal market.
A.I.2. Fresh dairy products
14. The Parties submit – following the Commission's decision in M.6119 - Arla/Hansa [6] – that within dairy products a distinction should be made between fresh and longlife dairy products. Furthermore, within fresh dairy products, separate product markets should be defined: fresh milk, fresh buttermilk, plain yoghurt, value added yoghurt, fresh cream and quark. [7]
15. Fresh milk is milk with a standardised fat content, which is pasteurised at 72° Celsius ("C") for 15 seconds. In M.6242 - Lactalis/Parmalat, the Commission left open the question whether there could be a health segment within the market for fresh milk. [8] The Parties do not believe there is a relevant market covering a health segment for fresh milk. This question can be left open as the transaction does not raise serious doubts as to its compatibility with the internal market under any alternative definition.
16. Fresh buttermilk is a specific kind of milk which is thicker and sourer than ordinary milk. The Commission found fresh buttermilk to constitute a separate product market, because there was only limited demand side substitution. [9] In addition, the Commission concluded that organic fresh buttermilk forms a separate relevant product market as opposed to conventional fresh buttermilk. [10] The Parties do not necessarily agree with this split, but accept it for the purpose of the assessment of this transaction.
17. Fresh plain yoghurt is a fermented product also produced from raw milk, which has been partially skimmed and pasteurised and fermented by adding special yoghurt cultures. The Commission concluded that organic fresh plain yoghurt forms a separate relevant product market as opposed to conventional fresh plain yoghurt. [11] The Parties do not necessarily agree with this split, but accept it for the purpose of the assessment of this transaction.
18. Value added yoghurt is made from basic plain yoghurt which has been added with flavours, colouring, sugar, fruits and additives. [12] It is normally sold in packs varying from 100 ml to 1 litre. In M.5046 - Friesland/Campina, the Commission concluded that plain yoghurt and flavoured yoghurt were distinct product markets due to different consumption habits and significant price differences. [13] In addition, the Commission left open in Friesland/Campina the question whether value added yoghurt should be further divided into health and indulgence segments. [14] The Parties further submit that with regard to a possible distinction between value added yoghurt and quark the result of the market investigation in Friesland/Campina was not equally clear and that, to a certain extent, there is demand-side substitutability between the two products. For the purposes of the present case, these questions can be left open as the transaction does not raise serious doubts as to its compatibility with the internal market under any alternative definition.
19. Fresh dairy liquid cream is raw milk which has been standardised to a fat content of 8% or more (often up to 38%). Cream is low-pasteurised at 78° C for 15 seconds or a similar combination. Cream is essentially a commodity produced as a by-product of milk processing and the production of various fresh dairy products. In a previous case, the Commission distinguished between liquid and spray cream, [15] as well as dairy and non-dairy cream. [16] As Allgäuland does not produce spray cream nor non-dairy cream, the only overlap would be in respect of liquid dairy cream. The Commission has also left open whether fresh liquid cream and longlife liquid cream belong to the same relevant product market. [17] The Parties reserve the right to argue that they belong to the same market but accept the distinction for the purpose of the assessment of this transaction. This...
To continue reading
Request your trial