Argentina’s competition enforcer has accepted its second fix-it first remedy, approving the acquisition by the largest branded food products company in the country subject to the divestment of a brand – though one commissioner said this was unnecessary.
The acceptance of the remedy ends a four-year battle to clear Molinos Rio De La Plata’s acquisition of Mondelez’s dry pasta unit, which included brands Canale, Don Felipe, Terrabusi and Vizzolini, and two production sites located in Buenos Aires.
Argentina’s previous fix-it first remedy came when the authority required Anheuser Busch InBev to divest seven of its brands in the country to up-front buyer CCU Argentina, as a condition for AB InBev’s 2016 takeover of SABMiller. That clearance was conditional on the divestments, but since the Molinos divestment has already occured, it received full approval.
Molinos is the country’s largest branded food products company, making a wide range of packaged foods including pasta, margarine, rice, and flour. Mondelez is a US multinational confectionery, food and drink company that wished to exit the pasta market in Argentina.
The companies notified the Argentine enforcer of the deal in 2014, and the National Commission for the Defence of Competition asked them in 2016 to submit further information on the deal’s effects. The enforcer was concerned the tie-up could lead to Molinos having a dominant position on the market for dried pasta, and increasing the prices of its pasta brands.
After several witness hearings and request for information, Molinos submitted a proposal to the authority in 2017 to divest the Vizzolini dried pasta brand to coffee producer Bonafide, which belongs to the Carozzi group. Under Argentinian merger control procedure, the commission must perform a technical review on mergers and issue a recommendation to the Secretary of Trade, which is the ultimate deciding body.
The companies argued that the relevant market should also include fresh pasta as well as dried pasta, and the market shares between the two were different for the company, however the authority did not accept this. The commission issued its approval on 15 June, but one commissioner dissented.
Commissioner Pablo Trevisan said the divestment was not needed. Molinos’s market shares have decreased since 2013, he said, and despite high concentration in the dry pasta market, the last five years has seen room for the growth of new brands, and competitors have presented effective competition.
Trevisan also said the proposed divestiture of the Vizzolini brand would be ineffective to remedy any supposed loss of competition. The brand lacks the ability to compete effectively, both in the short term and on a permanent basis, as the it has been inactive for some time and will not attract customers, he said.
The Secretary of Trade approved the deal last week, after the National Commission for the Defence of Competition agreed to the proposed remedy.
Allende & Brea partner Julián Peña in Buenos Aires said the case shows the tendency of the Argentine enforcer to try to adapt to international best practices and change from its historical practices.
Counsel to Molinos Rio De La Plata
Pérez Alati, Grondona, Benites & Arntsen. Partner Luis Barry in Buenos Aires.
Counsel to Mondelez
Marval, O'Farrell & Mairal. Partner Miguel del Pino in Buenos Aires assisted by Ariel Irízar and Antonella Boidi.
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