The competition watchdog fears Tasmanian dairy farmers could feel a price squeeze if Canadian giant Saputo swallows the local cheese businesses run by rival Lion Dairy and Drinks.
The proposed $280 million acquisition of Lion’s processing plants in Tasmania’s northwest would result in up to 80 per cent of the raw milk produced in Tasmania being bought by either Saputo or rival Fonterra, which holds the biggest market share in the state.
The ACCC warned this new dynamic could decrease the intensity of competition for milk, resulting in lower farmgate prices and worse terms of supply being offered to farmers.
“The market for the acquisition of raw milk in Tasmania is already concentrated,” the ACCC said in its statement of issues on Thursday.
“The proposed acquisition would combine processing plants of the second and third largest acquirers of raw milk”.
Saputo, which operates a milk processing plant at Smithton in Tasmania’s northwest, would increase its market share to about 35 per cent if it acquired the Lion facilities in Burnie and King Island as proposed.
The Canadian company would also add the South Cape, King Island Dairy and Tasmanian Heritage bands to an Australian stable that already includes Coon, Cracker Barrel, Devondale and Sungold, following the $1.3 billion purchase of Murray Goulburn last year.
That deal also required the ACCC to step in, with the acquisition going through only after Saputo agreed to divest its Koroit plant, which was bought by Bega Cheese.
Submissions on Saputo’s proposed deal with Kirin-owned Lion are being sought from interested parties, particularly regarding whether the remaining processors in Tasmania would constrain Saputo post-acquisition from lowering its farmgate milk prices.
A final decision will be delivered on September 26.