February 19, 2010

ACCC casts doubts on Cargill's fat business acquisition

The Australian Competition and Consumer Commission (ACCC) on Thursday (Feb 18) raised concerns about Cargill's proposed purchase of the edible fats and oils unit of Australian food company Goodman Fielder.

The ACCC said there appears to be a minimal supply of refined fats and oils between the east and west coast of Australia, and is considering whether the geographic scope of relevant refining markets should be narrowed.

It is also looking into the costs to an existing refiner of edible fats and oils of commencing production of both bulk and packaged edible bakery and yellow fats.

The proposed acquisition could enable the merged firm to unilaterally exercise market power in these markets, the watchdog said.

In particular, the ACCC is investigating whether the merged firm could significantly and sustainably increase prices, reduce quality, service and/or innovation in these areas.

The ACCC estimates that the merged firm will have at least half of the market share in each of the markets of concern.