The Australian Competition and Consumer Commission says it will not oppose French dairy giant Lactalis BSA’s proposed acquisition of Fonterra’s consumer, dairy ingredients and food service businesses.

Lactalis and Fonterra both currently acquire raw milk from dairy farmers in Victoria and Tasmania, as well as processing and supplying a range of dairy products across Australia, the Australian Competition and Consumer Commission (ACCC) said.

“We looked very closely at the transaction as it will combine two of the largest buyers of raw milk in Victoria and lead to some further consolidation in Tasmania,” ACCC deputy chairman Mick Keogh said.

“While we acknowledge the concerns raised by some representative bodies, after careful consideration we have determined that the acquisition is unlikely to result in a substantial lessening of competition.”

The ACCC found that across Gippsland, the Murray and Western Victoria, alternative buyers of raw milk would continue to constrain Lactalis if the acquisition proceeded.

“We found that while the industry in Tasmania is already concentrated, Lactalis has a limited presence and the acquisition would not substantially alter the market dynamics.

“If the acquisition proceeded, Lactalis would continue to be constrained by Saputo and, to a lesser extent, Mondelez,” Keogh said.

Fonterra and Lactalis have differing end product mixes and they often seek to acquire milk from farmers with different production profiles, the ACCC said.

“Accordingly, we found that they are not likely to be each other’s closest competitors.”

This was reflected by analysis that showed very few farmers switched between the two processors.

The ACCC also concluded that the transaction was unlikely to substantially lessen competition in the wholesale supply of dairy products such as drinking milk, cream, cheese, chilled yellow spreads and dairy ingredients such as milk powder.

It said the differing production focus of Fonterra and Lactalis meant there was limited overlap between the two in the supply of these products.

The Australian Competition and Consumer Commission says it will not oppose French dairy giant Lactalis BSA’s proposed acquisition of Fonterra’s consumer, dairy ingredients and food service businesses.

Lactalis and Fonterra both currently acquire raw milk from dairy farmers in Victoria and Tasmania, as well as processing and supplying a range of dairy products across Australia, the Australian Competition and Consumer Commission (ACCC) said.

“We looked very closely at the transaction as it will combine two of the largest buyers of raw milk in Victoria and lead to some further consolidation in Tasmania,” ACCC deputy chairman Mick Keogh said.

“While we acknowledge the concerns raised by some representative bodies, after careful consideration we have determined that the acquisition is unlikely to result in a substantial lessening of competition.”

The ACCC found that across Gippsland, the Murray and Western Victoria, alternative buyers of raw milk would continue to constrain Lactalis if the acquisition proceeded.

“We found that while the industry in Tasmania is already concentrated, Lactalis has a limited presence and the acquisition would not substantially alter the market dynamics.

“If the acquisition proceeded, Lactalis would continue to be constrained by Saputo and, to a lesser extent, Mondelez,” Keogh said.

Fonterra and Lactalis have differing end product mixes and they often seek to acquire milk from farmers with different production profiles, the ACCC said.

“Accordingly, we found that they are not likely to be each other’s closest competitors.”

This was reflected by analysis that showed very few farmers switched between the two processors.

The ACCC also concluded that the transaction was unlikely to substantially lessen competition in the wholesale supply of dairy products such as drinking milk, cream, cheese, chilled yellow spreads and dairy ingredients such as milk powder.

It said the differing production focus of Fonterra and Lactalis meant there was limited overlap between the two in the supply of these products.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.