The Australian Competition and Consumer Commission (ACCC) has raised competition concerns over Canadian dairy firm Saputo’s proposed acquisition of Lion Dairy & Drinks’ cheese business.

In April, Canadian firm Saputo entered an agreement to acquire the speciality cheese business of Lion-Dairy & Drinks in Australia for A$280m ($197m).

Saputo, which owns a milk processing plant in Smithton, Tasmania, has proposed to buy Lion’s cheese processing plants in Burnie and King Island in Tasmania.

Additionally, the Canadian firm proposed to acquire Lion’s cheese brands, including South Cape, King Island Dairy and Tasmanian Heritage.

The proposed acquisition will see the merger of two plants, which are reported to be the second and third biggest buyers of raw milk in Tasmania.

ACCC deputy chair Mick Keogh said: “We are concerned that combining these two operators may lead to Tasmanian dairy farmers being paid lower prices for their raw milk.

“If Saputo acquires the Burnie and King Island Lion plants, we will be left with a structure where two companies, Fonterra and Saputo, buy more than 80% of the raw milk produced in Tasmania.

“Each would have a market share several times bigger than the next largest buyer of raw milk, Mondelez-Cadbury.”

ACCC was notified by some of the farmers that Lion has been offering a better price for winter milk, as well as providing the option to fix the price of a percentage of their milk for up to three years.

The Australian competition watchdog is examining if these features offered by Lion would continue after the proposed acquisition.

It is also investigating the impact of the proposed acquisition on the supply of cheese in Australia.

Saputo currently offers its cheese products under various brands, including Coon, Sungold and Devondale. However, ACCC’s initial understanding is that the proposed acquisition is unlikely to raise competition concerns in this area.

Keogh further added: “Lion focuses on premium speciality cheeses, and Saputo focuses on everyday cheeses.

“Our initial analysis suggests that a combined Saputo-Lion would face continued competition from a range of suppliers, including domestic cheese producers, supermarket private labels, and cheese importers.”

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