MONOPOLY INQUIRY INTO THE SUPPLY OF FRESH PROCESSED MILK TO MIDDLE GROUND RETAILERS IN SCOTLAND

STATEMENT OF ISSUES

The Competition Commission has sent an issues letter to Robert Wiseman Dairies PLC in its inquiry into the supply of fresh processed milk to middle ground retailers in Scotland.

The Commission sends such letters to parties about whom it has reached provisional findings. The letter explains these findings and highlights issues that the investigating group wishes to consider further. The Commission has reached no conclusions about whether conduct mentioned in the issues has occurred, or is occurring, nor whether any matters may be expected to operate against the public interest.

This statement, which includes a summary of the issues, is being made public so that interested parties can bring to the Commission’s attention any matters that they believe should be raised.

The Commission’s provisional findings are:

that a monopoly situation exists - as defined in section 6 (1) (a), qualified by section 9 (1), of the Fair Trading Act 1973 – in that at least a quarter of all the fresh processed milk supplied in Scotland to the middle ground retailers defined in the reference is supplied by members of one and the same group of interconnected bodies corporate; and
that this monopoly situation is in favour of the Robert Wiseman Dairies PLC group (Wiseman).

The Commission has now to determine:

whether any steps (by way of uncompetitive practices or otherwise) are being taken by Wiseman for the purpose of exploiting or maintaining that monopoly situation and, if so, by what uncompetitive practices or in what other ways;
whether any action or omission on the part of Wiseman is attributable to the existence of that monopoly situation and, if so, what action or omission and in what way it is so attributable; and
whether any facts found by the Commission, in investigating these matters, operate or may be expected to operate against the public interest.

The issues that have been brought to the attention of the Commission and which it intends to consider in the next stage of the inquiry are:

Whether the supply of fresh processed milk to middle ground customers is a separate market from supply to major supermarket groups.
Whether the supply of fresh processed milk to middle ground customers should be segmented for the purpose of competition analysis into, for example, retailers and non-retailers, such as caterers and schools.
Whether, given the present arrangements both for the purchase of raw milk, and for the supply of fresh processed milk to customers, the geographical market should be defined as Scotland.
Whether there have been any agreements, arrangements or practices between suppliers of fresh processed milk to middle ground retailers in Scotland which affect prices, customers’ purchasing preferences, or may be anti-competitive.
Whether any of Wiseman’s contracts with retailers for supplying fresh processed milk stipulate exclusivity of supply.
Whether a factor in Wiseman’s offerings to middle ground retailer customers in the last year or so has been a desire to prevent new competitors from establishing a foothold in the Scottish market by, for example, selective targeting of discriminatory prices on those for whose business they are competing.
Whether Wiseman’s winning of new business from middle ground retailers in the last year or so involved inducements and/or a pricing policy which could have anti-competitive effects.
Whether Wiseman’s marketing activities in the last year or so have been a response to proactive marketing by competitors.
Whether the effect of Wiseman’s marketing and other activities, including its acquisition of a raw milk supply business, has undermined competitors, deterred potential new entrants or otherwise restricted competition.
Whether the number and extent of the price cuts that Wiseman has been offering to middle ground retailers in Scotland in the last year or so indicate that the prices previously charged for supplying fresh processed milk were excessive, in terms of a fully competitive market, and/or led to unduly high levels of profitability.
Whether Wiseman has a reputation as an aggressive competitor and, if so, whether this acts as a barrier deterring other suppliers from entering the market.

This press notice is posted on the Commission’s web site: www.competition-commission.org.uk/21-00.htm. Copies can also be obtained from the Reference Secretary (Scottish milk inquiry), room 633, New Court, 48 Carey Street, London WC2A 2JT, telephone 020 7271 0288, to whom any matters that should be brought to the Commission’s attention can be addressed – if possible, before 23 May.

Notes to Editors

On February 3 2000, The Director General of Fair Trading referred to the Competition Commission, for investigation and report, the supply of fresh processed milk to middle ground retailers in Scotland (see OFT press release 07/00).
‘Middle ground retailers’ are defined in the Commission’s terms of reference as retailers other than:
- ASDA Group plc, Marks & Spencer plc, Safeway plc, J Sainsbury plc, Somerfield Stores plc, Tesco plc and each of their subsidiaries, and
- those whose sole business is the delivery of fresh processed milk to households.
No conclusions will be reached about whether any matters may be expected to operate& against the public interest until the Commission submits its report to the Secretary of State, on 2 November 2000.
Further information can be obtained from the Commission's website at www.competition-commission.org.uk/ref.htm
Enquiries should be directed to:

Francis Royle, Press Officer Tel: 020 7271 0242