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The European Commission has opened an in-depth investigation, under the EU Merger Regulation, into the proposed acquisition of control over ED&F MAN by Südzucker, a German company that is Europe's largest sugar and molasses producer. ED&F MAN is the second largest sugar trader and largest molasses trader worldwide. The Commission’s preliminary investigation has indicated potential competition concerns as regards the markets for white sugar, in particular in Southern Europe, imports of raw cane sugar for refining for the whole of the European Economic Area (EEA)1 and molasses, especially in Central Europe. The opening of an in-depth inquiry does not prejudge the final result. The Commission has now a deadline of 23 March 2012 to take a final decision.
“The Commission has a duty to be vigilant as this is an important food ingredient and there are already few players in a market that is concentrated and with high entry barriers. Recent price increases also show a need to ensure that the small margin for competition is not further reduced." said Joaquín Almunia, Commission Vice President in charge of competition policy.
Südzucker intends to acquire part of the share capital of ED&F MAN as well as veto rights which, taken together, would give it sole control over the UK sugar trader. The proposed agreement was notified to the Commission for regulatory approval on 19 September. Sugar is an important nutritional element and an essential ingredient in the processing of food. Molasses is a by-product of sugar refining and is used in the fermentation (yeast, citric acid, distillation) and the animal feed industries.
The preliminary investigation has shown that, in particular in Italy and Greece, the acquisition would lead to high combined market shares in the already concentrated market for the supply of refined sugar. In addition, it would remove a strong alternative supplier of molasses in several Member States, in a market where alternative suppliers are scarce and barriers to entry high. In the in-depth investigation the Commission will carefully scrutinise whether the proposed transaction could ultimately lead to higher prices for consumers.
As EDFM also imports raw cane sugar into the EEA, the Commission cannot exclude at this stage that the transaction could also adversely impact Südzucker's rivals' access to raw cane sugar, an essential input for the production of white sugar.
The parties submitted remedies during the first-phase review, but these could not remove the Commission's initial concerns that the concentration might significantly impede effective competition within the EEA or a substantial part of it.
Merger control rules and procedures
The Commission, in 1989, was given the power to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Art 1 of the Merger Regulation). The Commission clears the vast majority of mergers after a one-month review, but if it has competition concerns it must open an in-depth investigation (Phase II review). The opening of a full probe, which lasts 90 working days, does not prejudge its outcome. For statistics on merger reviews go to: http://ec.europa.eu/competition/mergers/statistics.pdf
There are currently three other ongoing phase II investigations. The first one concerns the proposed acquisition of the hard disk drive business of Japan's Hitachi by Western Digital Corporation of the US (see IP/11/660, deadline is 30 November 2011). The second one assesses the proposed acquisition of NYSE Euronext by Deutsche Börse (see IP/11/948, deadline here is 22 December 2011). The last ongoing phase II investigation was opened a few days ago into the planned acquisition of Synthes by Johnson and Johnson, both US companies active in the area of orthopaedic medical devices (see IP/11/1306). The deadline for a final decision in the latter case is 19 March 2012.
The Südzucker-ED&F MAN case has been registered under the number M6286:
http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=2_M_6286
