The Austrian Federal Competition Authority (“AFCA”) was notified of the planned merger of Salzburger Alpenmilch Genossenschaft eGen (the acquiring company) with Gmundner Molkerei eGen (the transferring company), as well as of the incorporation of the operational side of Gmundner Molkerei into SalzburgMilch GmbH on 14 March 2022 (Z-5902). Following a 14-day extension of the deadline, the merger was cleared subject to commitments (remedies).
The merger concerns the markets for (i) the collection of raw milk (purchasing market) and for (ii) the sale of dairy products (selling market). After an initial competition assessment based on the information available, the investigations were focused on the area of the market that deals with the collection of raw milk. Ultimately, no market definition had to be found.
Requests for information
The AFCA made several comprehensive requests for information to obtain details of the planned merger from the notifying party and gain a better understanding of the market. The other official party, the Federal Cartel Prosecutor, also submitted several requests for information to the notifying party.
AFCA’s competition concerns
Following the investigations, the AFCA was concerned that the conditions for agricultural milk suppliers as members of the eGen cooperatives would worsen due to competition pressure being reduced as a consequence of the merger.
Potential competition concerns remained in relation to the wholesale level and collection of raw milk. However, the open issues were dispelled when the notifying party offered commitments in accordance with § 17 para. 2 of the Federal Cartel Act (KartG). The merger investigation found that the modified merger notification would neither cause nor strengthen a position of market dominance (§ 4 KartG), and that effective competition would also not be significantly impeded.
Commitments dispel competition concerns
To dispel the competition concerns, the merging companies offered commitments in accordance with § 17 para. 2 KartG, thereby undertaking to introduce measures aimed at counteracting any negative consequences of the merger, specifically by offering a package of minimum guarantees in relation to the dairy farmers’ situation.
This package of minimum guarantees is valid for six years and comprises the following points:
- Superior delivery rights and purchasing guarantee
- Freedom to also sell directly and via farm gate sales
- Milk supply contracts with appropriate right of termination
- Availability of fixed-term milk supply contracts with extension option
- Right to terminate membership of the cooperative
- Right to send delegates to the supervisory bodies
- Separate collection of conventional milk, organic milk and hay milk where possible
- Passing on of synergy effects created by the merger to the dairy farmers.
“These commitments guarantee a fair supply chain. With such an important product as Austrian milk, it is essential that we ensure supplies in the long term,” explained Deputy Director General Harsdorf-Borsch.
The case report and commitments can be downloaded here (in German):