12 June 2015

Muller UK & Ireland Group LLP (Müller) and Dairy Crest Group plc (Dairy Crest) are 2 of the 3 main dairy processors in the UK. Together they process around 3.5 billion litres of milk per year and account for nearly half of the fresh milk consumed in the UK.

The Competition and Markets Authority (CMA) has found that the proposed acquisition gives rise to a realistic prospect of a substantial lessening of competition in the supply of fresh milk to major grocery retailers with national scope (national multiples) in certain regions in Great Britain.

The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the Competition Commission and the competition and certain consumer functions of the Office of Fair Trading, as amended by the Enterprise and Regulatory Reform Act 2013.

In reaching its decision, the CMA took into account the significant financial challenges facing the dairy sector in the UK. The CMA has found that Dairy Crest and Müller would be the 2 main suppliers of fresh milk to national multiples in some regions. The CMA considers that the merger may lead to higher prices in the supply of fresh milk to national multiples and, in turn, for consumers. The constraint provided by other dairy processors may not be sufficient to mitigate the competition concerns arising from the merger.

Sheldon Mills, CMA Senior Director of Mergers and decision-maker in this case, said:

“The CMA is aware of the very significant challenges the UK dairy sector is currently facing. These challenges are recognised in the framework which we used to assess the merger. However, the CMA found that the transaction may nevertheless give rise to competition concerns, since it removes the rivalry between the 2 main suppliers of fresh milk to major grocery retailers in certain parts of Great Britain.

“Unless the businesses offer undertakings that resolve the competition concerns, this transaction will face an in-depth investigation to ensure that the merger of 2 of the largest UK dairy companies will not result in higher prices for national grocery retailers and, ultimately, for consumers, for whom milk is an important everyday purchase.”