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5 September 2000

NUTRECO HOLDING BV/NORSK HYDRO ASA MERGER INQUIRY

ISSUES STATEMENT

The Competition Commission has sent letters to the main parties in its inquiry into the proposed Nutreco BV/Norsk Hydro ASA merger.

An issues letter is always sent to main parties before the Competition Commission has reached any conclusions and is designed to highlight those matters which have been identified by the investigating group for further consideration, and to ensure that nothing has been missed. The statement of issues is being made public to inform all interested parties should there be any further points they wish to raise with the Competition Commission within the next week. No conclusions have yet been reached by the Competition Commission about whether any matters operate or may be expected to operate against the public interest.

In the context of trends and changes in the salmon farming and associated industries, such as producer-led consolidation and vertical integration, and also trends and changes in consumer demand, the Commission has identified a number of issues that it wishes to consider arising from the information received from the main and third parties. The issues the Commission intends to consider are as follows:

Market definition

What is the most appropriate definition of the market or markets relevant to the merger, taking into account such factors as: whether Scottish salmon is distinct from all other salmon and whether Atlantic salmon from Pacific salmon; the substitutability of other fish for salmon; whether salmon that has been gutted forms a distinct market from salmon that has undergone secondary processing; and the geographic extent of the market or markets.

Barriers to entry or expansion

Whether barriers to entry exist in the salmon farming market. For example whether barriers arise because of: limited site availability; regulatory restrictions - environmental, trade or otherwise - in each relevant country; access to capital; the necessity of access to technical knowledge; access to buyers of salmon and to processing capacity and subsequent purchasers; access to supplies of raw materials; the existence of excess capacity; constraints on imports. Whether the merger would affect the prospects for new entry into the salmon farming market. Whether the merger would have the effect of exacerbating, diminishing or changing the nature of any barriers to entry. Whether there are any barriers to, and the prospects of, new entry into the secondary processing, salmon feed and smolt market or markets.

Effect on competition

Whether the merger would reduce competition between salmon farmers and whether the position of the remaining competitors would be weakened as a result of the merger. Whether competition between salmon feed suppliers would be reduced as a result of the merger. Whether competition between smolt producers would be reduced as a result of the merger.

Market power

The effect of any increased market power resulting from the merger including: the ability by the merged companies to restrict competition by not exploiting sites in Scotland; the ability to discriminate between feed customers on matters such as price, quality or contractual arrangements; whether the market power of the merged companies in the salmon feed market could be used to increase their market power in salmon production; whether the merger would threaten the status or viability of Scottish Quality Salmon; whether the merger would give the merged companies an unfair advantage in price negotiations with any of its customers.

Other issues

Whether the merger would have adverse effects on employment or local incomes in Scotland and whether the merger would adversely affect the environment. Whether the merger would enable the merged companies to gain more control over the farmed salmon chain. Whether any changes made by the merged companies in the management, production and strategy of salmon farming would increase the likelihood of a lower quality product being produced; and whether the effect of the merger has the potential to undermine to reputation of Scottish salmon. Whether there would be any other adverse effects or benefits arising from the merger.

The public interest

Whether the merger might be expected to operate against the public interest.

This press notice is also available on the Competition Commission web site: www.competition-commission.org.uk/45-00.htm or from the Joint Reference Secretary (Nutreco/Hydro Seafood Inquiry), Room 338, New Court, 48 Carey Street, London WC2A 2JT.

Notes to Editors