What a Pain (au Chocolat)!
The Competition and Markets Authority (the “CMA”) is investigating the completed acquisition by Cérélia Group Holding SAS (“Cérélia”) of Jus-Rol from General Mills, Inc.
Jus-Rol is a best-selling brand of bake-at-home products. Cérélia is the largest manufacturer of bake-at-home dough products in the UK.
CMA Concerns
The CMA is concerned that this merger:[1]
- Could lead to an increase in wholesale prices (and ultimately increased prices to consumers);
- May degrade non-price aspects of Cérélia’s offering such as quality, range and innovation;
- May divert sales from private labels to the Jus-Rol brand; and
- May give rise to a substantial lessening of competition.
The CMA has referred the completed merger for investigation and published a statement setting out the main identifiable issues that it believes may give rise to a substantial lessening of competition (an “SLC” – see below for more on this) (the Issues Statement can be found here).
Cérélia’s Response
Cérélia’s response to the CMA’s Issues Statement (which can be found here) disagrees with the CMA’s initial findings and explains that Cérélia believes the CMA has improperly considered the actual competitive structures of the markets within which the entities each operate, and that there is no plausible theory of harm and/or a SLC occurring as a result of the merger.[2]
The CMA has powers to prohibit Cérélia and Jus-Rol from taking further steps to integrate without its consent and until the investigation has completed. A final report is set to be published by the CMA by 29 November 2022.
Mergers – RMSs and SLCs
Pursuant to the Enterprise Act 2002 the CMA is entitled to refer a ‘relevant merger situation’ between two or more enterprises for investigation, if it believes the merger has resulted, or may result, in a ‘substantial lessening of competition’ for goods or services within UK markets.
The table below explains what is meant by a relevant merger situation and substantial lessening of competition.
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What if the CMA objects to a merger once it has already completed?
The fact a merger has completed does not prevent the CMA from investigating it. The CMA may refer a merger for investigation within four months of completion.
If the CMA determines that a merger will adversely affect UK markets, measures will be decided in order to remedy, mitigate or prevent an SLC. These measures include:
- Imposing price caps on products or services;
- Limiting the merged entity’s ability to restrict access to customers;
- Imposing a full prohibition of the merger; and/or
- Requirement to divert shareholding to a suitable purchaser who can provide effective competition.
More generally, the CMA is entitled to restrict merged entities from integrating, conduct unannounced on-the-spot investigations, order the cessation of anti-competitive conduct, issue fines (up to 10% of worldwide turnover) and increase surveillance. The CMA’s enforcement powers for individuals can include director disqualification and criminal sanctions.
Top tips?
If you are planning a merger, we recommend that you seek legal advice at an early stage to ensure among other considerations that your arrangements are not in breach of competition law.
You can also notify the CMA of a proposed merger by requesting clearance. This is voluntary and there is no requirement to notify, although completing without clearance may give rise to risks.
Please note that the National Security and Investment Act 2022 has also introduced a mandatory notification regime whereby the Secretary of State can scrutinise and intervene in certain acquisitions that could harm the UK’s national security. This is separate from the CMA’s ability to investigate under the Enterprise Act, and a merger may qualify for review under both pieces of legislation.
Get in touch
If you would like to know more about this article or require any advice on issues you may be facing, please get in touch with Daisy Divoka for any Food & Drink queries or the Commercial, Technology & Data Team for any Competition queries.
[1] Cérélia / Jus-Rol merger inquiry - GOV.UK (www.gov.uk)
[2] Cerelia's response to issues statement (publishing.service.gov.uk)