PRESS RELEASE

BABY MILK: ANTITRUST GIVES OK FOR NUMICO-MELLIN DEAL BUT SETS CONDITIONS ON END-USER PRICES AND SALES CHANNELS

The Italian Competition Authority, at its meeting of 15 June 2005, authorized the purchase of Mellin S.p.A. by Koninklijke Numico N.V., but specified certain measures to guarantee a significant increase in the availability of milk for newborn babies and for infants under the brand names of Milupa and Mellin outside the pharmacy channel, and specifically in supermarkets, as well as the sale of special milk products in these modern distribution channels. In particular, Numico undertook to make significant reductions in the prices it charges distribution chains and specialist shops for babies’ milk.

The Authority held that in the market for baby milk, where competitive forces are weak, the proposed operation might have helped the major operators (Numico-Mellin, Plada, Nestlé, Humana) form a collectively dominant position, creating the conditions for tacit coordination among them on a common commercial strategy to sell such milk mainly through pharmacies, where prices are very high. The possibility of such tacit collusion could only be nullified by the strong development of sales outside the pharmacy channel, and in particular in modern sales outlets where more intense competition among operators may lead to lower average prices. In this regard, the inquiry revealed that the initiatives so far launched by the distribution chains were not, on their own, sufficient to give supermarkets a stable position as the preferred channel for sales of milk products for infants. Indeed, apart from the introduction of milk sold by Coop Italia under its own brand name, which gave a big boost to the development of this channel, the other distribution chains have so far not adopted concrete measures of this kind. The Authority therefore concluded that the sale of milk for infants outside of pharmacies can only become the norm if the major producers choose to make that their preference. With this in mind, the Authority obtained Numico’s undertaking to guarantee a large increase in the availability of its milk products for newborn babies and for infants in the large retail chains and especially in supermarkets, and a significant reduction in prices for such milk products.

Rome, 23 June 2005