ACCC Urged to Block Coles’ Milk Factory Buy Amid Competition Worries

Dairy farmers’ representatives are urging the competition regulator to prevent supermarket behemoth Coles from purchasing two milk processing plants.

In April 2023, Saputo, a milk processor, disclosed the sale of its Laverton factory in Victoria and its Erskine Park facility in New South Wales to Coles for a sum of $105 million. This sale is awaiting the green light from regulatory bodies.

The decision on whether to approve, reject, or stipulate further conditions on this transaction will be made by the Australian Competition and Consumer Commission (ACCC) in the coming week.

However, by July, the ACCC had expressed apprehensions that this acquisition might cause significant disruptions in the dairy industry landscape.

Rick Gladigau, a dairy farmer from South Australia and the head of the Australian Dairy Farmers (ADF) advocacy group, voiced hopes that the ACCC would stand against the transaction.

He highlighted potential issues such as diminished transparency, reduced negotiation leverage for farmers, and threats to competition.

The ADF’s scepticism towards the acquisition of these crucial milk processing plants stems from Coles’ past actions, notably during the 2011 dairy market slump. Coles had rolled out milk priced at $1 per litre on Australia Day over a decade ago, setting off a prolonged pricing battle among leading retailers.

Commenting on this, Mr. Gladigau stated, “We experienced their modus operandi and its implications. The low-priced milk deeply affected both processors and farm gate prices, essentially eroding what was once a lucrative market.”

He further pointed out the ADF’s worries that this agreement could sideline third-party stakeholders.

In response to inquiries by ABC concerning the dairy farmers’ appeal to halt the sale, Coles relayed a statement by their CEO, Leah Weckert, made to the stock exchange on July 20.

The statement emphasised Coles’ commitment to constructive dialogue with the ACCC, mentioning, “From our vantage point, this acquisition won’t diminish competition in any pertinent sector.” It further highlighted that Coles presently purchases around 80% of the output from these plants and plans to offer milk processing services to Saputo Dairy Australia under a tolling agreement.

Gladigau mentioned not receiving any direct communication from Coles regarding the apprehensions of farmers. He stressed the necessity of ensuring farmer security if the sale goes through, encompassing enhanced safeguards for producers under the Food and Grocery Code, and advocating for the code to be obligatory for supermarkets, farmers, and vendors.

The ACCC is set to announce its verdict on this matter on September 14.

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