The European Commission has opened an in-depth investigation to assess whether the proposed acquisition of the industrial chocolate business of Archer Daniels Midland ("ADM") by Cargill is in line with the EU Merger Regulation. Both US-based companies supply industrial chocolate as well as fat-based coatings and fillings.
Industrial chocolate, which is sold in liquid or solid form, is used by customers in the food processing industry to produce end-consumer products. Customers of industrial chocolate include producers of biscuits, ice-cream, chocolate confectionery and other end-consumer products.
The Commission’s preliminary investigation showed potential competition concerns in the supply of industrial chocolate to customers in Germany and the UK. The Commission found that Cargill, ADM and Barry Callebaut are the main suppliers of industrial chocolate to customers in these markets. The investigation also revealed that several smaller competitors for the supply of industrial chocolate have a more limited presence and do not pose a sufficient competitive constraint on the parties. The proposed transaction could eliminate an important competitor and reduce the choice of suitable suppliers in already concentrated markets, which could lead to price increases.
The proposed transaction does not include the activities of ADM in semi-finished chocolate products such as cocoa liquor, cocoa butter and cocoa powder.
The Commission now has 90 working days, until 8 July 2015, to investigate the proposed acquisition in-depth and determine whether these initial concerns are correct. The opening of an in-depth inquiry does not prejudge the final result of the investigation.
The transaction was notified to the Commission on 19 January 2015.
Companies and products
Cargill is a US-based privately held company active in the international production and marketing of food, agricultural and risk management products and services. Its business includes the production and marketing of industrial chocolate and fat-based coatings and fillings as well as of semi-finished chocolate products such as cocoa liquor, cocoa butter and cocoa powder.
Archer Daniels Midland is a US company which processes, sells and distributes industrial chocolate and fat-based coatings and fillings globally.
Merger control rules and procedures
The Commission must assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
In addition to the current transaction, there are eight other on-going phase II merger investigations:
- the planned acquisition of a controlling stake in De Vijver Media by Liberty Global, with a decision deadline on 5 March 2015;
- the planned acquisition of Jazztel by Orange in the Spanish telecommunications market. The deadline for a decision is 30 April 2015;
- the planned acquisition of Biomet by Zimmer, both of the US, with a decision deadline on 26 May 2015;
- the proposed joint venture between two of world's leading coffee manufacturers, Douwe Egberts Master Blenders 1753 B.V. of the Netherlands, and Mondelēz International Inc. of the US. The Commission's deadline for a final decision is 1 June 2015;
- the proposed joint venture between the three collective rights management organisations PRSfM, STIM and GEMA in the online licensing of musical works, with a deadline on 26 June 2015;
- the proposed acquisition of US-based rotating equipment manufacturer Dresser-Rand by Siemens of Germany, with a deadline on 30 June 2015.
- the proposed acquisition of Alstom's energy related divisions by General Electric with a deadline on 8 July 2015.
- the proposed acquisition of the Greek gas transmission system operator DESFA by the Azeri state oil company SOCAR.