The Australian Competition and Consumer Commission (ACCC) has released a statement confirming that it won't oppose Bega Cheese's proposed acquisition of Warrnambool Cheese and Butter.
Bega and Warrnambool Cheese and Butter each operate dairy manufacturing plants that produce a range of processed dairy products and compete for the acquisition of raw milk from dairy farmers.
But this competition isn't significant enough to road-block the proposed acquisition, according to the ACCC.
"The ACCC considered that there was limited overlap between Bega and Warrnambool Cheese and Butter in relation to the acquisition of raw milk in the dairy region in south west Victoria (and areas of northern Victoria),” ACCC Chairman Rod Sims said.
“The ACCC concluded that a merged Bega and Warrnambool Cheese and Butter would continue to be constrained by other dairy manufacturers that they compete more closely with in the acquisition of raw milk, including Murray Goulburn and Fonterra.
"Murray Goulburn and Fonterra are also the largest suppliers of each of the processed dairy products supplied by Bega and Warrnambool Cheese and Butter, and would be likely to competitively constrain the parties, in the event that they merge, in the future," Sims said.
The ACCC recognised that many dairy manufacturers in Australia currently export significant quantities of the relevant dairy products supplied by Bega and Warrnambool Cheese and Butter and would be able to redirect exports into the domestic market to increase supply in Australia.
The ACCC considered that in addition to competition from domestic dairy manufacturers, imports are also likely to exert a degree of competitive pressure in the wholesale supply of the dairy products supplied by Bega and Warrnambool Cheese and Butter.
Warrnambool is currently the subject of a bidding war between Bega, Murray Goulburn and Canadian processor Saputo, and earlier this week a 9.99 percent stake of the company was bought by the Australian subsidiary of Japanese food giant, Kirin.