PARMALAT/CIRIO
PRESS RELEASE
PRESS RELEASE
The Antitrust has begun an investigation into Parmalat and Cirio
The Antitrust Authority has begun an investigation into the Parmalat and Cirio companies. It follows Parmalat's acquisition of Cirio's entire milk division, to ascertain whether this operation is likely to create or strengthen a dominant position on the relevant market, such that it might substantially reduce competition on a lasting basis.
The worldwide aggregate turnover of the Parmalat group in 1997 was about 7,120,000 million lire, of which 2,174,000 million came from sales in Italy. In the dairy sector, the aggregate turnover for 1997 was around 1,230,000 million. The turnover of Cirio's dairy division in 1997 was 1,281,000 million lire, practically all from sales in Italy.
This acquisition raises problems of competition on several markets: fresh milk, UHT milk, fresh cream, UHT cream and bechamel. Depending on the shelf-life of the products, and the capacity of companies to transport and market them in places far from where they are packaged, the relevant geographical dimension is to be deemed national for all these markets, except for fresh milk. In the latter case, the geographic area is more restricted and is roughly limited to the regional boundaries.
Since this was an acquisition between two of Italy's leading milk and dairy producers, it has major effects on competition in all the relevant markets: the Authority is concerned that potential competition may be eliminated, and that one single operator may become established with the result, regardless of the specific shares obtained on each market, that it might enable the company to act with considerable independence of competitors.
The operation raises competition-related concerns in respect of the effects it might have on the packaged milk sector, in which it would actually constitute a de facto merger between Italy's two main milk producers.
Following the operation, Parmalat would retain about 41% of the entire fresh milk market, more than three times that of the second largest company, Granarolo Felsinea. The new group would acquire a leadership position nationwide in the fresh milk market, further strengthening Parmalat's existing leadership in the UHT milk market. As far as individual local fresh milk markets are concerned, the operation would bring about substantial structural changes, particularly in Campania, Lazio, Liguria, the Veneto and Lombardy, where one of the two parties would further strengthen their existing leadership position.
On the fresh milk market, even where only one of the two companies operates, the acquisition would do away with the potential competition from the other company which would be the only competitor able to easily enter territorially contiguous markets; for these are markets which can only be penetrated by distributing fresh milk produced for adjacent markets or by directly purchasing milk from local producers. It should be noted that Parmalat and Cirio are practically the only companies to have concluded the large number of acquisition agreements that have been concluded in the dairy sector in recent years.
The investigation will be completed within 45 days of commencement.
Rome, 21 April 1999