Nordzucker may only acquire Danisco Sugar without the Anklam production site

The Bundeskartellamt has cleared the acquisition of the sugar activities of the Danish company Danisco A/S, Danisco Sugar A/S, by Nordzucker AG under the suspensive condition that Danisco’s sugar production plant in Germany, at Anklam in Mecklenburg-West Pomerania, is sold to a suitable purchaser before the acquisition is realized.

The acquisition affects the German domestic market for industrial sugar (sugar for the food industry). Investigations by the Bundeskartellamt have shown that this market is characterized by an uncompetitive duopoly between Nordzucker and the largest German sugar producer, Südzucker AG.

The structural conditions in this market are influenced primarily by the European Sugar Market Regulation and its implementation in the Member States. These structural conditions range from substantial transparency on production costs and consumer prices through to a regulation of quotas via the award of sugar production quotas and extensive import control. The European Sugar Market Regulation already favours a market structure which is characterized by national monopolies or oligopolies. Added to these framework conditions is the general homogeneity of mass-produced industrial sugar and the general indispensability of sugar for the food industry. The Bundeskartellamt has found evidence of a mutual demarcation of distribution areas in large parts of Germany. It is not transport costs and the lack of production capacity which are the main factors preventing advancing competition in competitors’ key sales areas. Rather, the oligopolists themselves are refraining from making any competition advances in order to keep price levels high within Germany.

According to the Bundeskartellamt’s investigations Pfeifer & Langen, the third major German sugar producer, currently does not bring any substantial competition into the oligopoly either. The same applies to the European competitors. Moreover, the opening up of the European markets for sugar from third countries, which has been propagated by the European Commission, has had no effect so far, at least not in Germany.

The unrestricted acquisition of Danisco Sugar A/S by Nordzucker would have further expanded the joint dominant position held by Nordzucker and Südzucker. Not only the fact that the production capacities at the Anklam plant would have been added, but also the elimination of a powerful competitor would have strengthened the existing oligopoly in Germany. These effects are prevented by the obligation to sell the Anklam plant to a suitable third party before the acquisition project is put into effect.

The domestic competition potential of the Anklam sugar production plant can only be maintained if the acquirer is not a member of the oligopoly and if it appears likely that on the basis of its entrepreneurial resources and scope of activities it will be able to act as a competitor in Germany in the future. It must also be ensured that Anklam’s sugar production quota, which is essential for market activity, will not be withdrawn after the sale to a third party.

The entry of a major European sugar producer to the German sugar market in particular would be able to dispel the competition concerns. In this respect a solution could possibly be expected to emerge soon with the Dutch company Koninklijke Coöperatie Cosun U.A., Breda.