What will the Defense of Competition evaluate to endorse or stop the operation?

What will the Defense of Competition evaluate to endorse or stop the operation?

At times where even the president Luis Lacalle Pou revealed his “concern” for the purchase of the company Minerva of three floors of its competitor Marfrig, the Commission for the Promotion and Defense of Competition of the Ministry of Economy and Finance (MEF) will have a key role, being the one that authorizes or not the operation.

When analyzing the transaction, through which some sectors warn that Minerva could go on to slaughter 1 out of every 2 cows in Uruguay, The Defense of Competition must determine if it constitutes an anti-competitive practice and, if so, sanction the company or stop the purchase.

The director of Economics of the Faculty of Social Sciences, Leandro Zipitria, explained in dialogue with Radio Rural that the commission “could block this fusion”, although for that some conditions must be met. It can happen “if it is understood that there is going to be an increase in prices for consumers or a decrease in prices for producers without compensation for consumers,” he analyzed.

The economist specializing in industrial organization, regulation and antitrust, stated that “after the merger is authorized, the prices will be set by the market”, since the Defense of Competition “is not a price regulator”.

Options that could lead to a merge crash

Faced with objections from various sectors, Zipitría, who is a consultant for the world Bank on issues of regulation and defense of competition and was an advisor to the FEM, warned: “If the commission understands that there will be an increase in consumer prices and a decrease in producer prices, then it could prevent or block the concentration in Uruguay”.

However, he made it clear that this is something quite complicated. “How to prove collusion? The information that is public is not enough. There has to be some kind of firm proof, emails, calls or meetings where it is shown that they agree”, he specified and affirmed that “this, in principle, is not obtained from the public information that exists”.

In turn, the economist raised another possibility, in the event that it is understood that the company can impose a price. “If there is evidence that this could happen, the commission could block or impede the merger,” he observed, although there is also another possibility such as “requesting that certain plants be divested”, in order to change the market structure.

With the purchase, Minerva would reach 45% of the work in Uruguay

If the merger goes ahead, for a total of 1,540 million dollars, the Brazilian company Minerva will reach almost 45% of the country’s total slaughter capacity, after the recent acquisition, endorsed by the Defense of Competition, of a refrigerator of Breeders and Packers Uruguay (BUP).

The operation includes adding 16 Marfrig refrigerators, in three of the four plants that the firm has in the country. It’s about the fridge Cologne, La Caballada refrigerator (Leap) and the Inaler refrigerator (Saint Joseph), which together slaughter 18% of all Uruguayan cattle, which would be added to the current 26.6%.

Source: Ambito

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