The Australian Competition and Consumer Commission will not oppose the proposed merger between SPC Limited and Ardmona Foods Limited, but only after significant undertakings were provided by SPC, ACCC Chairman, Professor Allan Fels, said today.
SPC and Ardmona are the largest canners of fruit products in Australia, particularly deciduous fruit (peaches, pears and apricots) and tomatoes. When combined, they are likely to account for 90 per cent of the canned fruit market and around 40 per cent of the canned tomato market in Australia.
"It was only after extensive market inquiries and the provision of an enforceable undertaking by SPC to inform growers about developments in the industry and establish a formal consultation process, that the ACCC decided not to oppose the merger.
"This undertaking was discussed with grower representatives before the ACCC decided to accept it. The ACCC was particularly concerned about the growers' position as they would face only one buyer for their fruit.
"The ACCC found that the reduction in the number of canners from two to one would be likely to substantially lessen competition".
"But it felt that the concerns would be addressed by undertakings and these would allow the acquisition to proceed. Growers believe the undertaking addresses their concerns and are satisfied with the outcome".
The undertakings relate principally to the establishment of a consultative committee comprising the merged entity's representatives and representatives from the growers. The committee will discuss changes in the industry, pricing factors and intake levels for each fruit season. This will provide the growers and the new merged entity with an open exchange of information and the opportunity to voice any concerns. It also provides the growers with access to information regarding the business of the canners, and vice versa, in order to facilitate informed discussion.
Imports, and the potential to import, were a significant factor considered by the ACCC. Imports of canned fruit account for about nine per cent of the market and imports of tomato products about 50 per cent. Imports of canned fruit are a constant threat and will impose a constraint on SPC Ardmona. For example, supermarket housebrands and generic label products account for around 20 per cent of the canned fruit market and while these are currently supplied by SPC and Ardmona they could be switched to imported product relatively easily.
"After taking into consideration the undertakings provided by SPC, the ACCC considered that any anti-competitive detriment caused by the merger will be minimised. Under these circumstances, the ACCC decided not to oppose the merger.
"The decision shows the ACCC does not automatically oppose a merger that creates a very large player in the Australian market. The ACCC considers the effect on competition and the competitive dynamic is the important issue, not the market share held by the merged entity. This decision is not a precedent, there have been many similar rulings", Professor Fels said.
The proposed merger, which is yet to gain shareholder approval, is to be effected by a Scheme of Arrangement initiated by Ardmona.