ACCC told to butt out of Saputo-MG deal

29 Mar, 2018 10:15 AM
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NO FEARS: Anti-competitive fears were based on outdated information, said Kerry Callow, a former United Dairyfarmers of Victoria (UDV) president. Farmers have backed the sale of MG to Canadian proceesor Saputo.
To say there is only Fonterra and Saputo, once MG is missing, is incorrect.
NO FEARS: Anti-competitive fears were based on outdated information, said Kerry Callow, a former United Dairyfarmers of Victoria (UDV) president. Farmers have backed the sale of MG to Canadian proceesor Saputo.

The Australian Competition and Consumer Commission (ACCC) has been accused of unnecessary interference in Canadian dairy giant Saputo’s purchase of Murray Goulburn (MG).

Dairy farmers in Victoria’s south-west and South Australia said the ACCC should have stayed out of the proposed sale.

The ACCC said it wanted feedback from farmers before making a decision on the sale of MG to Saputo.

The commission on Wednesday announced a short postponement, until Wednesday, April 4, of its final decision on the sale.

The ACCC will announce its final decision the day before MG suppliers are due to vote on the deal.

ACCC chairman Rod Sims has said Saputo would not be able to acquire MG, as it would mean both Koroit and Warrnambool Cheese and Butter’s (WCB) Allansford factory would become part of the same company.

Mr Sims said he was concerned this may result in a lessening of competition for milk and lower payments for farmers.

The ACCC said if Saputo retained Koroit, one company would own about two-thirds of the milk processing capacity in south-west Victoria.

No concerns

Former United Dairyfarmers of Victoria (UDV) president Kerry Callow said she believed concerns about competition went back 40 years, when milk tankers operated by Nestle and Warrnambool Cheese and Butter (WCB) only had a limited range.

"They can now go to Adelaide, and back,” Ms Callow said.

Newer processors, such as the Union Dairy Company, were “fairly competitive".

“I can see it will be a competitive player and chasing milk,” Ms Callow said.

“To say there is only Fonterra and Saputo, once MG is missing, is incorrect.

“To me, it doesn’t make sense.”

There was also provision for expansion at WCB’s Allansford plant.

“The ACCC is just standing in the way of a smooth transition (to Saputo’s ownership)," she said.

“It’s high time those still supplying MG are given some consideration.

“We seem to be the last people anybody gives a damn about.”

SA perspective

South Australian Dairyfarmers' Association president John Hunt, said the proposed divestment of Koroit was the main topic discussed at a Saputo supplier meeting, at Heywood, Vic.

“The general feeling in South Australia is that the ACCC is doing their job, but they just want them to step out of the way, so the deal can go ahead,” Mr Hunt said.

“The divestment is not part of what the ACCC should be looking at.”

He said the ACCC’s proposed dairy code would cover any competition concerns.

In November last year, the ACCC suggested a mandatory code of conduct should be considered for the Australian dairy industry.

The code would address problems caused by bargaining power imbalances between processors and farmers, according to recommendations made by the ACCC in its interim report from its inquiry into the industry.

Mr Hunt said when he asked the question at the Heywood meeting, farmers in the room said they were happy with the sale.

“The real feeling is that farmers want to get that loyalty back,” he said.

“They really want to believe in their processor and don’t want to be chopping and changing who they supply.”

The ACCC could still put conditions on the sale, without necessarily insisting on the divestment of Koroit.

“The company has to adhere to a certain code of conduct and they will be monitored," he said.

"The ACCC can still intervene if Saputo does step out of line.”

Mr Hunt said Saputo, through Warrnambool Cheese and Butter (WCB), had been transparent and didn't follow MG and Fonterra, which dropped their prices in April 2016.

“They have been in the country four years – if they were going to be like that, they would have done it by now,” he said.

Ethical aspects

Tyrendarra, Vic, dairy farmer Larissa Gardiner said it appeared the ACCC had not spoken with farmers, before suggesting Saputo divest itself of Koroit.

She agreed with Mr Hunt that the ethics and actions of suppliers were the main reasons why there was little concern about Saputo keeping Koroit.

“Back in April 2016, Fonterra and MG dropped their prices dramatically," she said.

“Saputo stayed at $4.80 kilogram/milk solids (kg/MS) that is why a lot of farms moved to Saputo.

“But they got to the point where they could only take so many farmers.

“What the ACCC needed to take into account was the honesty of Saputo, in that situation.”

Her husband Matt said farmers wanted a fresh start.

"Let’s make it happen, there is a bloke there waiting to clear it all up and start afresh, to move on, and get going,” Mr Gardiner said.

“Everyone is getting sick of it.”

Farmers were also concerned about who might buy Koroit.

“We don’t know who is going to buy it – is it going to be in the farmer’s best interest?” he said.

Extra costs

Ms Singh-Mail agreed with Mr Gardiner that if Saputo sold Koroit, the company would have to move milk to other plants.

“That is going to put a whole lot of costs onto the business, which shouldn’t be there,” Ms Singh-Mahil said.

“What they are doing, now, is taking money out of farmer’s pockets.”

Ms Singh-Mahil said Saputo chief executive Lino Saputo had a track record of ethical behaviour.

“He doesn’t give us the answer we are after, he gives us an honest answer and if he doesn’t know, he tells us," she said.

“It’s a refreshing change.”

Many farmers would be reluctant to swap to a new owner at Koroit.

“It’s an awful risk, supplying someone you haven’t had anything to do with," she said.

"Farmers do not move lightly.”

Her husband, Brian Schuler, accused the ACCC of “being out of touch with reality".

“‘We want the ACCC to butt out and let the transaction go through," he said.

"They are playing with our lives.”

“If we have got it wrong, please ACCC, tell us.”

Farmers’ concerns echoed those around MG’s planned purchase of WCB in 2013.

MG withdrew after objections, raised by the ACCC, the sale would lessen competition for bulk cream and raw milk in the south-west.

At the time, dairy farmer and South West Coast Liberal MP, Roma Britnell said she believed the regulator was ill-informed.

She said the Victorian market was influenced by international prices rather than local competition.

Ms Britnell said at the time only a strong, globally significant co-operative could have any relevance in the international market.

The ACCC and Saputo declined to comment.

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