Juice merger must offer undertakings to avoid in-depth inquiry
Hain’s acquisition of Orchard will be referred for an in-depth merger investigation unless acceptable undertakings are offered.
Hain Frozen Foods UK Limited (Hain) bought Orchard House Foods Limited (Orchard) on 21 December 2015 and the Competition and Markets Authority (CMA) has found that the 2 companies are the largest suppliers of freshly squeezed fruit juice to supermarkets and other retailers, such as cafes, in the UK.
Freshly squeezed fruit juice sales are around £112 million in the UK annually. The companies are the only 2 suppliers to supermarkets, with other suppliers of freshly squeezed fruit juices having limited sales to the food service retailers such as cafes and restaurants. The CMA’s investigation found that other juice manufacturers did not intend to start supplying freshly squeezed juices to replace the lost competition. Therefore, the CMA believes that the merger raises competition concerns and could lead to higher prices for retailers and consumers.
The merged entity would also supply a significant share of prepared fruit to supermarkets and other retailers, but the CMA did not find a concern in this area because it faces sufficient competition from other suppliers.
Sheldon Mills, CMA Senior Director of Mergers and the decision-maker in this case, said:
Fruit juices are an increasingly popular purchase for UK consumers, in supermarkets, cafes and restaurants. Freshly squeezed juices are different in taste, quality and price from other concentrate juices. This merger removes the rivalry between 2 long-standing suppliers of freshly squeezed fruit juice to supermarkets and food service retailers.
Therefore, unless acceptable undertakings are offered, this merger will be referred for an in-depth investigation to ensure that it does not result in higher prices or worse quality for retailers and consumers.
All information relating to the investigation is available on the case page.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. For more information on the CMA see our homepage or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on merger cases.
- Under the Enterprise Act 2002 (the Act) the CMA has a duty to make a merger reference, resulting in an in-depth phase 2 merger investigation, if the CMA believes that it is or may be the case that a ‘relevant merger situation’ has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and that the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
- Under the Act a ‘relevant merger situation’ is created if 2 or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million (‘the turnover test’) or as a result of the transaction, in relation to the supply of goods or services of any description, a 25% share of supply in the UK (or a substantial part of the UK) is created or enhanced (‘the share of supply test’).
- The CMA’s duty to refer the merger for a phase 2 investigation under the Act is not exercised whilst the CMA is considering whether to accept undertakings (if offered) in lieu of a reference. Hain and Orchard have until 24 May 2016 to offer undertakings to the CMA that might be accepted by the CMA. The CMA then has until 1 June 2016 to decide whether these might be acceptable as a suitable remedy. If this is the case, it will consult on the proposed undertakings before accepting them. If no undertakings are offered and accepted, then the CMA will refer the merger.
- All the CMA’s functions in phase 2 merger investigations are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision-makers on merger investigations.
- The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business; the membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
- The text of this decision will be placed on the case page as soon as is reasonably practicable.
- Enquiries should be directed to Simon Belgard (email@example.com, 020 3738 6472).