The Italian Competition Authority opens a Second Phase investigation into a merger in the canned food sector


The proposed Bolton acquisition of Simmenthal from Kraft attracted the attention of the Italian Competition Authority (ICA). As the ICA feared that the transaction would have anticompetitive effects in the market for processed meat, it has opened a Second Phase investigation into it (CaseC11799, Bolton/Simmenthal). The relevant markets affected by the merger are the market for the production and retail of canned meat and tripe with tomato sauce. All these markets have a similar competition structure. With a market share constantly higher than 60% over the past three years Simmenthal is the leading player in these markets and probably it also enjoys a dominant position. Bolton is the next competitor to Simmenthal , though its market shares are much lower not exceeding 20%.
The ICA believed that the execution of the merger would strengthen the market power of Bolton leading to the creation or the strengthening of a dominant position for two reasons. First, due to the overlapping of the activities of the two most important market players, Simmenthal and Bolton, the entity resulting from the merger would have aggregate market shares in excess of 65% in the market for canned meat and 75% in the market for tripe, respectively. Second, the portfolio of brands owned by Bolton would comprise all the most notorious brands for canned meat. That would confer on Bolton a considerable bargaining position when negotiating with supermarket chains. In other words, the ICA is worried about the reduction of the buyer power of grocery retailers vis-à-vis Bolton, as of result of which the former would be unable to exert any countervailing power on the latter. Neither Bolton competitors would be able to exert any credible competition pressure on it due to their limited size and economic power. Therefore, the risk is that post-merger Bolton could rise selling-in prices to retailers and obtain from them a more favourable shelving for its products to the detriment of competitors. Should the investigation confirm the ICA concerns Boltom may be required to divest one or more of its brands in order to have the acquisition of Simmenthal cleared. 

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March 30, 2022 at 11:14 PM
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