The acquisition of Arrabawn’s branded liquid milk, butter and van sales business by Aurivo Co-operative will “not substantially lessen competition in any market for goods or services in the state”.

This has been concluded by the Competition and Consumer Protection Commission (CCPC) in its full determination following the merger notification in February 2023.

The CCPC has given Aurivo Consumer Foods Limited the green light to proceed with its acquisition of certain assets of Arrabawn Co-Operative Society Limited in September.

Aurivo acquired specified assets, including parts of Arrabawn’s business “in the supply of branded and unbranded liquid milk, cream and butter products”.

Aurivo

Before making a determination in this matter, the commission had regard to any relevant international obligations of the state and concluded that there were none.

The commission considered that the production and supply of branded and unbranded liquid milk and cream, and the supply of branded butter are “relevant product markets”.

To define these relevant product markets, the commission took into account the authority’s past findings, and the views of the parties and considered the following:

  • Are the production and supply of liquid milk, cream, and butter within the same relevant product market?;
  • Are branded and unbranded versions of liquid milk, cream, and butter within the same relevant product market?; and
  • Would a potential market for branded and/or unbranded butter include spreads?

The determination states the commission concluded that it does not need to precisely define the market for butter, as doing so will “not affect” its review of the acquisition.

The commission has identified the supply of branded butter as the “narrowest possible market”, as this is where the activities of Aurivo Group and the target assets overlap.

The narrowest potential geographic market for each of the above mentioned relevant product markets is the state, the commission concluded.

“The relevant geographic market is usually defined in terms of the location of suppliers and it includes those suppliers that customers consider to be feasible substitutes,” the determination states.

Competitive impact

The competitive impact of the acquisition has been examined in the following relevant potential markets:

  • The production and supply of branded and unbranded liquid milk in the state;
  • The production and supply of branded and unbranded cream in the state; and
  • The supply of branded butter in the state.

The commission concluded that the acquisition does not raise horizontal unilateral effects concerns in the these markets.

The share of Arrabawn in the production and supply of branded and unbranded liquid milk in the state in 2022 based on volume produced was 5-10%, while Aurivo Group accounted for 15-20%.

Arrabawn accounted for a 15-20% share in the production and supply of branded and unbranded cream in the state in 2022 based on volume produced. Aurivo Group had a share of 10-15%.

Arrabawn and Aurivo Group accounted for a 0-5% and 5-10% share repesectively in the supply of branded butter in the state in 2022 based on volume produced.

The commission considers that the acquisition does not raise any coordinated effects concerns in the state. These can occur where a proposed transaction changes the nature of competition in the relevant market.

The commission has identified the following potential vertical relationships between Aurivo Group and the target assets:

  • Aurivo Group procures raw milk and the target assets produce liquid milk and cream; and
  • Arrabawn procures butter from third parties to supply to customers, and Aurivo Group produces butter.

Based on the information in the possession of the commission, no plausible vertical effects theory of harm was identified. Thus, no further discussion of vertical effects was carried out.