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The Australian Competition and Consumer Commission (ACCC) has announced it will not oppose Lactalis Group's' proposed acquisition of Fonterra Co-Operative Group's consumer, dairy ingredients and foodservice businesses.

This decision marks a pivotal moment in the duo's ongoing consolidation within the Australian dairy market, particularly in regions like Victoria and Tasmania where both companies are major players.

The ACCC's deputy chair, Mick Keogh, noted that the commission conducted a thorough investigation into the potential impacts of the acquisition on market competition.

"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," he commented. “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's assessment revealed that alternative buyers of raw milk would remain active in the market, ensuring continued competition even after the acquisition. In regions such as Gippsland, the Murray and Western Victoria, Lactalis would still face constraints from other significant players, including Saputo and Mondelez.

Keogh said that while Tasmania's dairy industry is already concentrated, Lactalis's current market presence is limited, suggesting that the acquisition would not significantly alter competitive dynamics.

He noted that the differing end product focuses of Lactalis and Fonterra further reduce the likelihood of direct competition between the two entities, as they typically source milk from farmers with varying production profiles.

The ACCC also found that the transaction would not adversely affect the wholesale supply of key dairy products, including drinking milk, cream, cheese and dairy ingredients such as milk powder. The limited overlap in product offerings between Lactalis and Fonterra means that the acquisition is unlikely to disrupt supply chains or pricing structures in these categories.

Moreover, the commission highlighted the role of major retailers like Coles and Woolworths, which maintain significant bargaining power in the dairy market. These retailers not only influence market dynamics but also have the capacity to support new entrants, as demonstrated by Coles's recent acquisition of Saputo’s milk processing assets.

Lactalis, a French multinational dairy group, has a robust presence in Australia through various brands, including Pauls and Vaalia. In contrast, Fonterra, based in New Zealand, operates as a co-operative owned by approximately 8,000 farmers and is known for its consumer brands such as Western Star and Mainland.