Saputo Inc, Saputo Dairy Australia Pty Ltd and Warrnambool Cheese and Butter Factory Holdings Limited

On 4 April 2018, the ACCC announced it had accepted an undertaking (the Undertaking) from Saputo Inc, Saputo Dairy Australia Pty Ltd and Warrnambool Cheese and Butter Factory Holdings Limited (together, referred to as Saputo in the Undertaking) pursuant to s 87B of the Competition and Consumer Act 2010 (Cth) in connection with Saputo Dairy Australia Pty Ltd’s proposed acquisition of Murray Goulburn’s operating assets (the Proposed Acquisition).

The Undertaking requires that Saputo divest the Koroit dairy plant and assets (the Divestiture Assets) to a buyer to be approved by the ACCC. Saputo must also divest to the buyer, at the buyer’s option, the Koroit transport fleet. The Undertaking also requires Saputo to take all steps to procure consents to transfer customer contracts to the buyer and supply a guaranteed volume of milk to the buyer for a period of time (the details of these obligations are confidential but may be made available by Saputo to potential purchasers on a confidential basis).

The ACCC considered that in the absence of the Undertaking, the Proposed Acquisition would have had the effect or have been likely to have the effect of substantially lessening competition in relation to the acquisition of raw milk in western Victoria and south east South Australia.

The ACCC was concerned that if Saputo owned both its Allansford plant and Murray Goulburn’s Koroit plant, it would own most of the processing capacity in western Victoria and south east South Australia. Although there were other processors able to collect raw milk in the area, their plants either had limited capacity or were some distance away, making them less of a competitive constraint on Allansford than Koroit.

The ACCC was therefore concerned that the proposed acquisition would result in lower farmgate milk prices being paid to farmers in western Victoria and south east South Australia than would be the case if Koroit’s ownership remained separate to Allansford.

The objective of the Undertaking is to address the ACCC's competition concerns which would otherwise arise as a consequence of the Proposed Acquisition by placing obligations on Saputo to:

1. ensure that the Divestiture Assets are sold to an Approved Purchaser
2. create or strengthen a viable, effective, stand-alone, independent and long term competitor in the market for the acquisition of raw milk in western Victoria and south east South Australia
3. ensure that the Approved Purchaser has all the necessary associated assets and rights to compete effectively with Saputo and other dairy processors in the market for the acquisition of raw milk in western Victoria and south east South Australia
4. maintain the economic viability, marketability, competitiveness and goodwill of the Divestiture Assets prior to divestiture pursuant to the Undertaking, and
5. provide for the effective oversight of Saputo's compliance with the Undertaking.