Humana and Nordmilch can pool sales of their dairy products

The Bundeskartellamt has cleared plans by Humana Milchindustrie GmbH, Everswinkel and Nordmilch AG, Bremen to set up a joint venture (JV) to pool their main marketing activities. The JV will operate under the name Nord Contor GmbH.

The project affects the national sales markets for a series of dairy products (fresh milk, sour cream products, cream cheese, quark, butter, and sliced cheese). Except for the quark products market competition concerns could be dispelled from the outset. Although after the joint venture the market shares of the parties concerned in this market will more or less reach the threshold from which dominance can be assumed (33.3 %) and will be considerably higher than those of their competitors, the project was not expected to create or strengthen a dominant position. The relevant products of the parties concerned are so-called milk-basis products, which are produced or distributed by a large number of dairies. Among Humana’s and Nordmilch’s competitors in Germany are major companies such as the Campina/Friesland group, Ehrmann and Danone. Humana and Nordmilch are also faced with a highly concentrated and powerful opposite side of the market made up of companies from the food retail sector. Especially in the case of products which are not already “presold” due to their high brand status, these companies have sufficiently high buyer power to prevent an uncontrollable scope of action by the parties concerned. In addition, the parties also have customers in the food processing industry.

The joint venture will not create or strengthen a dominant position in the market for the acquisition of raw milk either. Both the German Farmers Association and the German Dairy Farmers Association asked to be admitted to the proceedings in order to represent the interests of the milk suppliers. In the view of the Bundeskartellamt, even after the joint venture the milk suppliers will still have a number of other dairies in all the regional markets affected to which they can sell their raw milk. Even though, under current market conditions (saturation of milk demand) switching to another dairy is only possible under difficult circumstances, this is insufficient reason to prohibit the project since it is not the cause of the current market situation. The joint venture will not further aggravate the situation. Contrary to complaints, the Bundeskartellamt does not expect that the pooling of sales will enable the parties to the concentration to pay such a high price for milk that the dairies named as their competitors will lose their raw material base and be forced out of the market.

The concentration between the two major dairies could be cleared because, firstly, in terms of sales markets, there are enough possibilities for the trade and other buyers on the demand-side to switch to alternative suppliers and secondly, there are still sufficient alternatives on the regional markets for the acquisition of milk for the milk producers concerned. In so far the case in question is different from previous other concentration projects in the dairy sector, some of which involved much smaller markets and market volumes, yet nonetheless raised competition concerns.

President Dr Bernhard Heitzer stated: “Again this case shows that the Act against Restraints of Competition provides for the necessary and appropriate tools for merger control in the milk sector. This existing legal framework allows for adequate consideration of concrete possibilities for the opposite side of the market (here the trade) to switch to alternative suppliers and of the effects on the markets for the acquisition of raw milk. Ultimately it is a matter for the sector itself to encourage further consolidation in the dairy sector. This does not require any sector-specific changes to the competition law, as often called for by representatives from interest groups and politicians”.