Kerry/Breeo Appeal : a Green Light to Anti-Competitive Mergers

The article argues that a March 2009 High Court decision allowing the acquisition by the Kerry Group plc of Breeo Foods Limited and Breeo Brands Limited - which had been previously prohibited as substantially lessening competition by the Competition Authority - is based on a faulty analysis of countervailing buyer power. Countervailing buyer power refers to the ability of buyers - retailers such as Tesco and Dunnes - to constrain the power of food processors - such as the merged entity, Kerry/Breeo - to raise prices post-merger. To be effective countervailing buyer power requires alternative sources of supply that consumers view as sufficiently close substitutes for the products of the merged entity to make any post-merger price rise unprofitable. However, the High Court adopts a different test: there should be alternative sources of supply irrespective of whether or not they are close substitutes. Thus it is possible adopting this approach that distance substitutes would be found - incorrectly - to exert sufficient influence to constrain post merger prices increases. Hence the High Court decision - if upheld by the Supreme Court - is likely to permit anticompetitive mergers.