JOHNSON ANNOUNCES CLEARANCE OF CARGILL/ CERESTAR MERGER

30 May 2002 12:13 PM

Competition Minister Melanie Johnson today announced clearance for the UK aspects of Cargill Incorporated's acquisition of Cerestar SA and published the Competition Commission's report on the merger.

On 21 January 2002 the European Commission referred part of the acquisition - concerning the supply of glucose syrups and blends in the UK - to the UK competition authorities under Article 9 of the European Community Regulation (ECMR).

The Competition Commission has now concluded that this aspect of the merger would not be expected to operate against the public interest for the following reasons:

- The relevant geographic market for UK consumers of glucose syrups and blends extends at least to northern France and the Benelux countries, despite the cost of transport across the Channel.

- It is unlikely the merged company could raise prices for its products because of the presence of two strong competitors with UK plants and Continental plants close to the Channel.

- Continental producers located further from the Channel would exert an important indirect constraint by ensuring that their main competitors could not produce artificial capacity shortages in the long run.

- The lack of price transparency in the market and the financial need to maintain high capacity utilization would also discourage any form of collusion between the producers to restrict capacity and raise prices.

- Customers are large and powerful buyers who can and do switch between suppliers.

Notes To Editors

1. Article 9 (6) of the ECMR imposes a four-month deadline from the EC's referral on the member state's authorities to publish any report or announce their findings on examination of the transaction in question. Under Article 7 of the Implementing Regulation (Regulation 47/98/EC), that period expires in this case on 30 May 2002.

2. Patricia Hewitt accepted advice from the Director General of Fair Trading (DGFT) that the proposed acquisition raised competition concerns and referred it to the Competition Commission on 19 February 2002 under sections 64, 69 and 75 of the Fair Trading Act 1973 (see DTI Press Release P/2002/108). The Commission submitted its report on 9 May.

3. The Fair Trading Act 1973 empowers the Secretary of State to refer to the CC for investigation and report actual or proposed mergers which create or intensify a market share of over 25 per cent of the supply in the UK, or a substantial part of the UK, of particular goods and services, or involve the take over of assets exceeding £70 million.

4. If the Competition Commission concludes that a merger is not against the public interest, the Secretary of State has no power to intervene to prohibit the merger or to impose conditions.

5. Copies of the Competition Commission's report "Cargill Incorporated and Cerestar SA: a report on the merger" (Cm 5521) are available from the Stationery Office, price £33.

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