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ACM decides to block acquisition of Unox by Zwanenberg

Summary

  • ACM has decided to block the acquisition of Unox by Zwanenberg.
  • The acquisition would have led to more-expensive smoked sausages, boiled sausages, and ambient wet soups.
  • Zwanenberg would have gained market shares of 60 up to 85 percent.

The Netherlands Authority for Consumers and Markets (ACM) has decided to block the acquisition of Unox by Zwanenberg. The planned acquisition would have made Zwanenberg practically the only major supplier of smoked sausages and boiled sausages in supermarkets in the Netherlands. Zwanenberg would also have gained too strong a position in the market for ambient wet soups. It would have gained market shares of approximately 60 up to 85 percent. ACM sees a risk that Zwanenberg could have used this strong market position to charge supermarkets higher prices. In that situation, consumers would have paid more. Zwanenberg produces meat products, soups, and sauces, including many private-label products for supermarkets. Unox is a well-known brand in the Netherlands in the markets for canned-meat products (such as smoked sausages) and ambient wet soups.

Martijn Snoep, Chair of the Board of ACM, explains: “We wish to prevent individuals from being confronted with higher prices as a result of this planned acquisition. It would have resulted in one competitor gaining too strong a position in the markets for ambient sausages and wet soups. That would have left supermarkets with fewer suppliers to choose from, and with the risk of price increases in their stores. That is an undesirable prospect, especially in a time when the public already has many concerns about higher food prices.”

Risk of higher prices

ACM has conducted an extensive investigation into the effects of this planned acquisition. In the investigation, various supermarkets have also shared their concerns with ACM regarding the risk of price increases. The acquisition would have made Zwanenberg practically the only supplier of private-label products as well as the owner of a strong high-end brand (which is Unox). Zwanenberg could have used that strong position to its advantage in negotiations with supermarkets in order to demand higher prices.

With regard to sausages (smoked and boiled) and ambient wet soups, Zwanenberg would have gained market shares of approximately 60 to 85 percent. ACM’s investigation has shown that, in that situation, supermarkets would have been left with too few alternative suppliers. Moreover, there are no indications that new suppliers can or want to enter these markets. One of the reasons is that entry requires considerable investments, and those investments cannot be easily recouped.

Remedies are insufficient for taking away ACM’s concerns

Over the past few months, ACM has given the companies involved many opportunities to submit a concrete and detailed proposal for taking away the risk of price increases, for example, by selling part of Zwanenberg’s production capacity to a suitable buyer. That new competitor could then compete with Zwanenberg, and thus prevent prices from going up. However, Zwanenberg’s proposals are insufficient for taking away ACM’s concerns. The planned buyer’s new production capacity is insufficient (at least for boiled sausages), the plan lacks specifics, and there will be a dependency between Zwanenberg and the buyer in the first two years. As a result, the risk of price increases will continue to exist. Supermarkets, too, have expressed their concerns about whether the proposals will ensure sufficient competition in practice. ACM thus has no assurance that the proposals will take away the concerns. That is why ACM has decided to block this acquisition. If the companies involved disagree with ACM’s decision, they can file an appeal against it.

ACM’s concentration control: mergers, acquisitions, and joint ventures

With any merger, acquisition, or joint venture, there is a question of whether sufficient competition will remain on that market right after the concentration as well as in the subsequent years. Competition ensures that products are of high quality, and that they are offered on the market at competitive prices. Competition also promotes innovation. That is why ACM decides in advance whether or not companies are allowed to join forces. ACM assesses whether the markets involved will continue to work well for people and businesses, now and in the future.

Market investigation into prices of food products

ACM is currently also conducting a market investigation in the grocery prices in Dutch supermarkets following reports about high prices of food products. This market investigation is separate from the assessment of the acquisition of Unox by Zwanenberg. ACM expects to publish the results of this market investigation by the end of this year.

See also