Coles takeover of a Laverton North dairy processing plant has been thrown into doubt after the Australian Competition and Consumer Commision announced they would review the acquisition.
In a statement of issues published on Thursday, the ACCC said it had identified preliminary competition concerns in Coles purchase of the Laverton North plant and another in NSW.
In April the supermarket giant bought the two plants from Canadian dairy conglomerate, Saputo, for $105 million.
The deal made Coles the first supermarket to own a dairy processing plant, but caused concern in the dairy industry about the influence it could wield over the market.
Coles is not only a large retailer of dairy products but also a large purchaser of raw-milk from farmers in Victoria and NSW, which it then processes at the two Saputo plants under an existing agreement.
The ACCC said there was particular concern about the effect this could have on the market for raw-milk from farmers in NSW.
“For NSW dairy farmers, concerns have been raised that this acquisition may change Saputo’s incentives to continue acquiring raw milk in NSW.
If Saputo does exit NSW as a result of the acquisition, this would leave limited competition in regions of NSW, which could result in farmers receiving lower prices for their raw milk,” ACCC Deputy Chair Mick Keogh said.
These concerns were echoed by Australian Dairy Farmers president Rick Gladigau who welcomed the move.
“Dairy farmers need strong competition for their milk at the farmgate.
ADF does not wish to see a sale that disadvantages dairy farmers in the long-term,” Mr Gladigua said.
In a statement to the Australian Stock Exchange, Coles CEO Leah Weckert doubted the acquisition would reduce competition given they already purchased 80 per cent of the products produced by the two plants.
“We remain confident that any outstanding concerns can be addressed so that the proposed transaction can proceed to completion,” Ms Weckert said.
The ACCC is accepting submissions to the review until August 3.
