When looking at a potential Dawn takeover of Kildare Chilling, the Competition and Consumer Protection Commission (CCPC) has plenty of previous work done in the sector which can be used as a possible template for any decision the organisation could make.
As commission member Brian McHugh says, the CCPC’s job in situations like this is to make sure that sufficient competition remains in the market post-merger.
According the legislation, the benchmark for the commission is that a merger or acquisition would not “substantially lessen competition”.
The European Commission decision on ABP’s buy into Slaney Meats in 2016 has become the CCPC’s template for investigations in this sector. The ABP decision was heavily referenced when they allowed the merger between Dawn Meats and Dunbia to proceed, and was again referenced in the CCPC’s decision to allow ABP’s purchase of Tipperary-based Good Herdsmen Ltd.
One of the major determining factors under that template is market share post-merger. The benchmark for making market-share calculations is the rather exotically named Herfindahl-Hirschman index. This index is worked out by taking the market share of all firms in the market, squaring them, and then adding them together. The red flags come when that calculation adds up to more than 2,000 points and the merger is more than 150 points or when the number is between 1,000 and 2,000 points after a change of more than 250 because of the merger.
Using the latest Irish Farmers Journal calculations, we can do the maths for a Dawn-Kildare Chilling merger and see the numbers for beef show little cause for concern, with a post-merger total of 1,736.75 and a merger change of 135 – both well below the red lines.
However, in sheep there are some major problems of market concentration with the post-merger situation of 3,225 points – more than 60% above the level that would be a cause for concern – and the 600 point move due to this merger four times the 150 point limit.
These sheep figures point to a market for farmers that would be highly uncompetitive, and exactly the kind of thing that the CCPC was set to prevent happening.
Unless Dawn and Kildare Chilling can come up with a way of driving that concentration down – for example by selling the sheep business to a smaller producer – there is no way the CCPC should be giving this deal the green light.