THE Australian Competition and Consumer Commission has deferred its decision on the proposed purchase of the Japanese-owned Rockdale Feedlot at Yanco, in southern NSW by Brazilian processor, JBS Swift, and is calling for more market feedback over the next week.
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However in a detailed paper on the takeover, released last week, the ACCC has raised dozens of areas where it sees "issues" with the proposal, including the future acquisition of feeder cattle and increased market concentration.
This is despite the ACCC forming the view already that the proposed acquisition would be unlikely to result in a substantial lessening of competition in the market for the supply of processed beef.
ACCC said in its report on the proposed takeover that the merged entity would continue to be "competitively constrained".
The ACCC began investigating the proposed deal between JBS Swift and Rockdale in April this year, with concerns a new JBS-owned entity could exercise too much market eastern-States control over the feedlot, slaughter, processing and even freight chains.
Swift already own nine processing plants and five beef feedlots in Queensland, NSW, Victoria, Tasmania and South Australia and concerns have been raised about rumoured company plans to control the supply of domestic beef to the major supermarket chains.
But there has also been concern too about potential job losses and the flow-on effect to the broader regional economy should the purchase not be allowed to go ahead.
The ACCC said last week it wants further information by next Tuesday on certain competition issues following its market inquiries to date.
In particular it's looking for comment on whether the proposed acquisition could raise competition concerns in the market for feeder cattle in the NSW and Victoria.
"The ACCC is concerned the proposed acquisition will result in increased market concentration within the region and remove Rockdale as a significant competitor to Swift and other market participants for the acquisition of feeder cattle," the report says.
"This could have an effect of forcing down or otherwise distorting the prices paid by the merged entity for the acquisition of feeder cattle."
The report notes that should the merger proceed, Swift would become the "largest single buyer of feeder cattle in the relevant market" and would hold two of the largest feedlots in the market and the merger world remove a significant buyer from the market which could have an impact on other local players.
The ACCC says it also wants information on the extent to which restockers and backgrounders compete with feedlots for feeder cattle, details of the cost to establish a new feedlot and the extent to which new smaller feedlots compete with the likes of Rockdale and Swift.
The ACCC says it will now publicly announce its final review by July 22, although this could still be subject to change.
Submissions with the relevant extra information can be sent by email to the ACCC at: mergers@accc.gov.au
The Statement of Issues is available on the public merger register page: www.accc.gov.au/mergersregister
