JBS’ proposed acquisition of Rivalea not opposed

ACCC

The ACCC will not oppose JBS Australia Pty Ltd’s (JBS) proposed acquisition of Rivalea Holdings Pty Ltd and Oxdale Dairy Enterprise Pty Ltd (together, Rivalea) finding that the transaction is not likely to substantially lessen competition.

JBS processes and supplies fresh pork, value-added pork products and pork smallgoods to wholesalers and retailers in Australia, including through its subsidiary Primo. JBS currently operates one pig abattoir and processing facility in South Australia.

Rivalea is the majority owner of the Diamond Valley Pork abattoir and processing facility in Laverton Victoria, and another abattoir and processing facility in Corowa New South Wales. Rivalea also grows live pigs and supplies fresh pork and value-added pork products to wholesalers and retailers in Australia.

“The ACCC found that the proposed acquisition is unlikely to substantially lessen competition in pork production and processing markets and therefore will not breach the Competition and Consumer Act,” ACCC Deputy Chair Mick Keogh said.

The ACCC’s investigation focused on the impact the proposed acquisition would have on service kill customers at Diamond Valley Pork, and the flow on implications for pork wholesalers and smallgoods producers. Rivalea’s Corowa abattoir is a closed system for biosecurity reasons and so does not provide third-party service kills and exclusively slaughters Rivalea’s own pigs.

“The ACCC closely considered the potential for JBS to frustrate or foreclose pork producers and wholesalers’ access to third-party service kills and competing smallgoods manufacturers’ access to fresh pork. In particular, we paid close attention to concerns raised by pig producers about their ongoing access to service kills,” Mr Keogh said.

The Diamond Valley Pork abattoir is an integral asset within the pork supply chain for pig producers, pork processors and smallgoods producers. It operates mostly as a service kill abattoir and a majority of the pigs slaughtered there are from non-Rivalea farms.

“Although Diamond Valley Pork is a very important asset in the supply chain, we consider that a strategy to foreclose or frustrate access to service kill customers is unlikely as it would create significant commercial risks for JBS, including a loss of throughput and profit at Diamond Valley Pork,” Mr Keogh said.

The ACCC also found it is unlikely that JBS will have the incentive to foreclose or frustrate access to fresh domestic pork for its wholesale and smallgoods competitors.

“Fresh pork can be transported significant distances, so there are alternative places where wholesalers can acquire fresh pork if JBS refuses supply,” Mr Keogh said.

In addition, while there are some exceptions, the ACCC found that the majority of pork used for smallgoods manufacturing can be substituted with pork sourced from other places, including imports. This will continue to provide a strong competitive constraint on JBS for most smallgoods manufacturers.

The ACCC also found that JBS’ acquisition of Rivalea is unlikely to substantially lessen competition in other markets, such as the acquisition of slaughter weight pigs, supply of pork processing and wholesale supply of fresh pork.

“Our assessment was based solely on the test required by Australia’s merger law, which requires us to consider whether an acquisition is likely to substantially lessen competition in any market. The ACCC is unable to consider other factors in deciding whether to oppose an acquisition,” Mr Keogh said.

“However, the ACCC will be closely watching trading behaviour in the pork industry, and will not hesitate to take enforcement action if there is any conduct that breaches the competition or fair trading provisions of the Competition and Consumer Act.”

Further information is available at: JBS Australia Pty Limited – Rivalea Holdings Pty Ltd and Oxdale Dairy Enterprise Pty Ltd

Note:

In considering the proposed acquisition, the ACCC applies the legal test set out in section 50 of the Competition and Consumer Act.

In general terms, section 50 prohibits acquisitions that would have the effect, or be likely to have the effect, of substantially lessening competition in any market.

Background

JBS operates abattoirs, value-add facilities and feedlots for a number of species across Australia’s eastern seaboard. JBS’ abattoir at Port Wakefield (SA) supplies service kills and further processing such as boning and value-adding services. JBS also supplies fresh pork, value-added pork, pork smallgoods and cooked pork products in Australia.

Rivalea has commercial activities in feedstock production, pig farming, service kills, processing such as boning and value-adding services, and the distribution of fresh pork and value-added pork products to wholesalers and retailers in Australia. Rivalea has ownership interests in two abattoirs in Australia, one in Laverton, VIC and one in Corowa, NSW that supply slaughter and processing services.

The majority of pigs in Australia are slaughtered utilising a ‘service kill’, whereby a separate abattoir operator performs the slaughter as a service, but does not own the pig.

‘Value-added pork products’ refers to pork that has undergone processing, which occurs once the pig carcass has been boned. This includes making fresh sausages, preparing pork for retail, and cooking.

‘Smallgoods’ refers to pork that has been processed into products including ham, bacon and other specialty smallgoods.

/Public Release. This material from the originating organization/author(s) may be of a point-in-time nature, edited for clarity, style and length. The views and opinions expressed are those of the author(s).View in full here.