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Feds examine packer merger

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Feb 10, 2005
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nw manitoba
Feds examine packer merger
this document web posted: Wednesday June 22, 2005 20050623p67

By Mary MacArthur
Camrose bureau

The federal competition bureau has begun its examination of the proposed merger of Canada's largest packing plants.

"We are very closely examining the proposed merger by Cargill Ltd. of Better Beef," said Morgan Currie of the mergers branch of the competition bureau.

"We are taking this proposed merger very seriously," said Currie.

There was little he could say about the April purchase of Better Beef of Guelph, Ont., the country's third largest packing plant by Cargill Ltd., Canada's largest meat packing company. The sale was for an undisclosed amount of money.

"The goal of our examination is to determine whether the proposed merger is likely to prevent or lessen competition in any relevant markets."

The merger would bring the company's kill capacity to 37,000 head per week, or more than half the weekly national kill.

Currie said the competition tribunal has already ruled that market power alone is not enough for the competition bureau to block a merger, but there are threshold levels that "cause concern."

He said any company controlling more than 35 percent of the market share is a concern and would raise red flags at the competition bureau.

As well as market share, the bureau also looks at the remaining competition, extent of foreign competition, barriers to entry and any change in innovation in the industry when making its ruling.

"Market power alone will not make the case, but it's our evaluation and evidence of what the likely effects of the merger will be."

Darcy Davis, chair of the Alberta Beef Producers, said his group opposes the merger of the two packing plants because of the control Cargill would have over the cattle and meat industry.

"We are against Cargill purchasing Better Beef," said Davis, who estimates Cargill would control 56 percent of the packing industry.

"We have some real concerns with that."

The competition bureau is interviewing sources in the industry that could be affected by the merger. If the bureau challenged the merger, it would be brought before a competition tribunal.

An investigation can take days to months depending on the complexity of the merger, said Currie

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