Acquisitions of two ailing pork producers by large meat processors will not be challenged, the Competition Bureau announced on December 17, 2012.
Meat processor Olymel L.P. is buying Western Canada’s largest hog producer, Big Sky Farms Inc., and Maple Leaf Foods is buying Western Canada second largest hog producer, Puratone Corporation. Big Sky is currently in receivership, and Puratone recently filed for protection under the Companies’ Creditors Arrangement Act.
The Bureau investigated both proposed mergers separately. The Bureau considered whether the merger would enable the processors to hog the market, and foreclose competitors from access to hogs in upstream markets or from purchasing hogs from upstream rivals, both of which would likely lessen or prevent competition.
The Bureau determined that the relevant geographic market was limited to the provinces in which the processors or producers were located, plus adjacent provinces. Olymel operates in Alberta while Big Sky operates in Saskatchewan and Manitoba. Maple Leaf operates in Alberta and Manitoba while Puratone operates only in Manitoba.
The Bureau found that Olymel and Maple Leaf would likely control enough slaughter capacity to foreclose their competitors access to hogs. However, neither would have an incentive to slaughter their competitors, as a foreclosure strategy would be unprofitable, the Bureau found. Thus, the Bureau concluded, the two mergers were unlikely to lessen or prevent competition substantially.