The CMA said the deal gives rise to a realistic prospect of a ‘substantial lessening of competition’ and will therefore be referred for an in-depth phase 2 investigation, unless acceptable undertakings are offered.
Pork Farms’ and the Kerry Foods business unit both manufacture and supply branded and own label CSP pork products to the food retail sector – a sector estimated to be worth £1 billion per year in the UK.
However, as a result of the deal, which completed on 17 August 2014, the merged entity will become the largest or second largest manufacturer and supplier of some CSP products to grocery retailers and to convenience stores, either as own label or branded goods.
For these products, the merged entity will face competition from only 1 or 2 other large suppliers, said the CMA.
“These are very popular products which are currently produced by a small number of manufacturers,” said Andrea Coscelli, executive director, Markets and Mergers, and decision maker in this case. “This merger will further reduce the choice available to retailers and consumers and may give the merged company the ability to raise prices or reduce the quality of these products.”
“Unless Pork Farms offers undertakings that resolve these concerns, we think it is necessary to investigate the merger in greater detail to see whether it could harm consumers’ interests.”
Lessening of competition
The CMA ruled that there is a realistic prospect that the merger will result in a lessening of competition in the branded, own label and convenience retail segments of the supply of cold pies, and the supply of sausage rolls, pasties and slices (when considered in combination) or the supply of sausage rolls (when considered individually).
The authority also said there is a realistic prospect that the merger will result in a substantial lessening of competition in the own label segment of the supply of hot pies.