SOUTH AFRICA – The Competition Commission has recommended a conditional approval of the merger between JSE-listed Clover and Dairybelle’s yoghurt and long-life milk businesses.

Farmers had expressed concerns to the commission over the market for the procurement of raw milk, a market in which Clover is dominant. These concerns related to buyer power and continued collusion in the market.

But the commission found that the merger itself was unlikely to result in a change to the market structure. Clover and Dairybelle both operate in the dairy industry but Clover is not active in the yoghurt market.

In 2006 the commission investigated a milk cartel in which Clover Industries, Clover, Parmalat, Nestlé, Woodlands Dairy, Lancewood, Milkwood Dairy and Ladismith Cheese were implicated.

The matter came before the Competition Tribunal but was taken on appeal to the Competition Appeal Court and the Supreme Court of Appeal. The commission subsequently withdrew the case.

In the latest transaction, despite the merging parties indicating that there would be no retrenchments, the commission decided to propose this as a condition of the merger.

The commission went further and said in the event of any retrenchments Clover should set aside an employee grant of R30,000, which would be used for training and reskilling opportunities.

A notice by Clover stipulates that the company will terminate the current secondary distribution services it offers to Danone. However, a condition proposed by the commission will ensure the continued supply of services to Danone until June next year.

“In the main, the recommended conditions are intended to address the potential negative impact of the merger on employment as well the ability of Danone to compete in the yoghurt market”, said acting deputy commissioner Hardin Ratshisusu.

October 17, 2014;