08 January 2007

Competition Commission

http://www.competition-commission.org.uk/index.htm

Stonegate + Deans Inquiry

CC says egg merger reduces competition

The CC has provisionally concluded that the completed merger of Clifford Kent Holdings Ltd, parent company of Stonegate Farmers Limited (Stonegate), and Deans Food Group Limited (Deans) through the creation of a new company, Noble Foods Limited (Noble) would reduce competition in key markets for shell eggs and liquid egg, leading to higher prices for retailers and other customers.

In a summary of its provisional findings published today, the CC has provisionally concluded that the merger, which brings together the two largest suppliers of shell eggs and processed eggs in the UK, is likely to lead to a substantial lessening of competition in markets for the supply of shell eggs-cage (intensive), free range and organic-to retailers, for the supply of liquid egg to some customers and for the procurement of eggs from producers.

Inquiry Chairman, Dame Barbara Mills said:

The merged company would be in a notably strong position, accounting for over half of both sales of shell eggs to retailers and the supply of liquid egg. Customers' ability to switch to alternative suppliers would be much reduced as a result of the merger with potential competitors unable to provide the required volumes due to their small scale by comparison with Deans and Stonegate (Noble). There would also be difficulties with increasing production capacity within a reasonable time. Other factors affecting possible competitors are a shortage of surplus eggs and problems over the use of imported eggs. In addition, many liquid egg customers also stated that powdered eggs do not represent a suitable substitute.

Given these factors, we think it is likely that the merged company would be able to increase prices to its customers, knowing that many would be unable to respond by buying from another supplier. Ultimately these prices rises could feed through to the consumer.

We also considered that the merged company's size could have an adverse effect on egg producers, giving it the ability and incentive to use its buying power to reduce prices and the quantity of eggs produced. This would have a further damaging effect on competition in the supply of eggs to customers.

Along with the provisional findings summary, which is available on the CC website at http://www.competition-commission.org.uk/inquiries/ref2006/stonegate/index.htm, the CC has also produced a notice of possible remedies to address the anti-competitive effects of the merger, including whether divestment would be effective in addressing these effects. The full provisional findings report will be published shortly.

The merger was referred by the Office of Fair Trading (OFT) on 13 September 2006. The CC is required to publish its final report by 27 February 2007.

Anyone wishing to comment further on the provisional findings or notice of possible remedies is requested to do so by Thursday 25 January 2007 by email to david.peel@cc.gsi.gov.uk or in writing to:

Stonegate/Deans inquiry
Victoria House
Southampton Row
London
WC1B 4AD

Notes for editors

1. The members of the Stonegate/Deans inquiry group are: Dame Barbara Mills QC (Group Chairman), Dr John Collings, Dr Peter Davis and Professor Stephen Wilks.

2. The Enterprise Act 2002 empowers the OFT to refer to the CC completed or proposed mergers for investigation and report which create or enhance a 25 per cent share of supply in the UK (or a substantial part thereof) or where the UK turnover associated with the enterprise being acquired is over £70 million.

3. The CC has a 24-week period in which it is required to publish its report, which may be extended by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period. It is required to report by 27 February 2007, but plans to do so sooner.

4. Further information on the CC and its procedures, including its policy on the provision of information and the disclosure of evidence, can be obtained from its website at: http://www.competition-commission.org.uk.

Jobs Now IN-HOUSE SOLICITOR OCS, a privately owned company, seeks to recruit a Corporate/Commercial Lawyer to join their Head Office based in Surrey More >> SOLE LEGAL COUNSEL Sought by JW Legal for their client, a dynamic organisation, to work closely with their CEO in London More >> BIDS EXECUTIVE Required by Matrix Legal for their client, a leading law firm, for a new position in their Bristol office More >> COSTS DRAFTPERSON With a minimum of 3 years experience sought by Ralli Solicitors to join their offices in the North West More >> LEGAL SECRETARY Sought by Freshfields Bruckhaus Deringer to support a number of Fee Earners in Abu Dhabi More >>

Legalday Related Pages

Contact

Victoria House
Southampton Row
London
WC1B 4AD

Switchboard: 020 7271 0100
Public Enquires: 020 7271 0243
Press Officer: 020 7271 0242
info@competition-commission.gsi.gov.uk
http://www.competition-commission.org.uk/index.htm

More Commentaries From
Competition Commission

CC Orders Price Cut Following Water Merger
03 May 2007

CC Issues Statement on Payment Insurance
13 April 2007

Supermarket Inquiry
23 January 2007

More Commentaries from
Competition Commission

Author/Firm Profile
Competition Commission