Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC clears acquisition of ADM’s industrial chocolate business by Cargill, (Jul 17, 2015)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC) has approved under the European Union (EU) merger regulation the proposed acquisition of the industrial chocolate business of Archer Daniels Midland (ADM) by Cargill, subject to conditions, the EC announced today. Both U.S.-based businesses supply industrial chocolate as well as fat-based coatings and fillings. Industrial chocolate, sold in both liquid and solid form, is used by customers in the food processing industry to produce consumer foodstuffs such as biscuits, ice-cream and chocolate confectionery.

Cargill is active in the international production and sale of food, agricultural, and risk management products and services. Cargill's businesses include the production and sale of industrial chocolate and fat-based coatings and fillings as well as the production and sale of semi-finished cocoa products that are used in the production of industrial chocolate. The industrial chocolate business of ADM processes, sells, and distributes industrial chocolate and fat-based coatings and fillings globally.

The Commission was notified of the transaction in January 2015 and opened an in-depth investigation in February 2015. The EC focused its investigation on competition in industrial chocolate markets and also looked at the effects of the transaction in the markets for cocoa products and chocolate compound.

The Commission found that Cargill and ADM are important suppliers of industrial chocolate to customers based around their plants in Germany. The parties' most important competitor in those areas is Barry Callebaut, albeit with a smaller market share. The investigation revealed that several smaller competitors have a more limited presence and would not pose a sufficient competitive constraint on the parties. The proposed transaction would eliminate an important competitor and reduce the choice of suitable suppliers in already concentrated markets, which could lead to price increases especially for small and mid-sized customers.

The Commission's investigation also showed that the market structure is different in the areas around the parties' plants in Belgium, France, and the United Kingdom. In these areas, the parties' combined market position is more moderate, and Barry Callebaut is a much more important competitor. The Commission therefore did not identify any competition concerns in those geographical areas.

To address the Commission's concerns, Cargill submitted commitments to divest ADM's industrial chocolate plant in Mannheim to a suitable purchaser. The Mannheim plant is the largest of ADM's industrial chocolate plants in Europe and is ADM's only industrial chocolate plant in Germany. The commitments ensure that an important alternative supplier will remain available and address in full the competition concerns raised by the acquisition on the market for industrial chocolate sold to customers located around the parties' German plants.

"Chocolate is a sweet yet serious business and we want to ensure that consumers will not have to pay more for their favorite chocolate sweets, biscuits and ice cream,” commented Commissioner Margrethe Vestager, in charge of competition policy. “With Cargill's divestment of ADM's industrial chocolate plant in Mannheim, the Commission is confident effective competition will continue."

Companies: Archer Daniels Midland Company; Cargill, Inc.

News: AcquisitionsMergers Antitrust