Dairy farmers sound alarm over ACCC greenlight of Fonterra-Lactalis deal

Australia's leading dairy representative group has expressed deep concerns following the Australian Competition and Consumer Commission’s (ACCC) decision not to oppose a potential merger between two of the dairy industry’s biggest players.

The ACCC last week announced that it was not opposed to French multinational Lactalis potentially acquiring Fonterra’s consumer, dairy ingredients, and food service businesses in Australia.

Both businesses currently acquire raw milk from dairy farmers in Victoria and Tasmania, as well as processing and supplying a range of dairy products across Australia.

ACCC deputy chair Mick Keogh said that the regulator looked very closely at the planned takeover as it will combine two of the largest buyers of raw milk in Victoria and lead to some further consolidation in Tasmania.

He said while the ACCC acknowledges concerns raised by some people in the industry, it determined - after careful consideration - that the acquisition would be unlikely to result in a substantial lessening of competition.

“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,” he said.

In the wake of the decision, Australian Dairy Farmers (ADF) President, Ben Bennett, said the commission had left farmers vulnerable in giving the green light to the proposed takeover.

Mr Bennett said the decision risks further weakening processor competition in Victoria and Tasmania – two of the country’s most critical dairy regions.

“Combining two major buyers reduces choice and bargaining power for farmers,” Mr Bennett said.

“That’s a major threat to farmgate prices, especially in a shrinking milk pool.”

As a result of last weeks ruling, the ADF is calling for court-enforceable undertakings to protect farmers, including:

• Preserving milk supply freedom – no forced exclusivity in contracts with farmers;

• Honouring all current Fonterra milk contracts;

• Guaranteeing continued operation of key processing sites; and

• Committing to regular Dairy Code compliance audits.

“Without enforceable protections, we risk further processor consolidation that hurts farmers and undermines supply security,” Mr Bennett said.