Clover Fonterra Ingredients (Pty) Ltd and Clover SA (Pty) Ltd / New Zealand Milk Products SA (Pty) Ltd (92/LM/Nov04) [2005] ZACT 42 (21 June 2005)

Clover Fonterra Ingredients (Pty) Ltd and Clover SA (Pty) Ltd / New Zealand Milk Products SA (Pty) Ltd (92/LM/Nov04) [2005] ZACT 42 (21 June 2005)

The Tribunal found that the joint venture constitutes a merger of the bulk (non-retail) dairy ingredients businesses of Clover and Fonterra. The relevant product markets are butter, buttermilk powder, whole milk powder, and skimmed milk powder, each with distinct characteristics and limited substitutability. Despite high post-merger market shares in some segments, NZMPSA's share is relatively small, and imports provide significant competitive constraints. Barriers to entry are not prohibitive, and customers possess countervailing power. The merger is unlikely to substantially lessen or prevent competition. However, because the parties retain rights to compete in other segments and can...

Citation
[2005] ZACT 42
Parties
Applicant: Clover Fonterra Ingredients (Pty) Ltd; Respondent: Clover SA (Pty) Ltd; Respondent: New Zealand Milk Products SA (Pty) Ltd; Respondent: Competition Commission
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
21 June 2005
Case Number
92/LM/Nov04
Procedural Posture
Large Merger / Merger Clearance and Conditional Approval
Outcome
Merger conditionally approved subject to notification and approval for any expansion of the joint venture's product scope.
Judges
Y Carrim, N Manoim, L Reyburn
Legal Topics
Merger Control, Joint Venture, Market Definition, Import Competition, Barriers to Entry, Vertical Integration
Competition Law Commercial and Corporate Merger Control Joint Venture Market Definition Import Competition Barriers to Entry Vertical Integration

Case Brief

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Parties

Clover Fonterra Ingredients (Pty) Ltd

Applicant

Clover SA (Pty) Ltd

Respondent

New Zealand Milk Products SA (Pty) Ltd

Respondent

Competition Commission

Respondent

Procedural Posture

Large Merger / Merger Clearance and Conditional Approval

Legal Issues

  1. 1 Whether the joint venture between Clover and Fonterra constitutes a merger under the Competition Act.
  2. 2 Whether the merger is likely to substantially lessen or prevent competition in the relevant product markets.
  3. 3 Whether the merger raises public interest concerns, including potential impact on employment.

Ratio Decidendi

The Tribunal found that the joint venture constitutes a merger of the bulk (non-retail) dairy ingredients businesses of Clover and Fonterra. The relevant product markets are butter, buttermilk powder, whole milk powder, and skimmed milk powder, each with distinct characteristics and limited substitutability. Despite high post-merger market shares in some segments, NZMPSA's share is relatively small, and imports provide significant competitive constraints. Barriers to entry are not prohibitive, and customers possess countervailing power. The merger is unlikely to substantially lessen or prevent competition. However, because the parties retain rights to compete in other segments and can...

Court Disposition

Merger conditionally approved subject to notification and approval for any expansion of the joint venture's product scope.

Orders

  • Clover Fonterra Ingredients (Pty) Ltd shall not sell or distribute any product of Clover SA (Pty) Ltd or New Zealand Milk Products SA (Pty) Ltd in South Africa other than defined products or products developed for CFI under clause 8 of the Master Agreement, unless prior notification and approval is obtained from the...
  • Employees of both Clover's ingredients business and NZMPSA will be transferred to CFI on terms no less favourable than their current employment.