POST Online Media Lite Edition


CONACOM to deny concentration of Frigomerc and Frigorífico Norte

Christian Fernsby |
The National Competition Commission (CONACOM) resolved to deny the authorization of the operation of economic concentration, between the companies Frigomerc SA and Frigorífico Norte SA, based on the grounds set forth in the aforementioned resolution.

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The CONACOM Board of Directors has concluded that if this operation is approved the Athena Foods Group, of which Frigomerc SA is a part, would be reinforcing its dominant position in the market for the acquisition of beef cattle for slaughter, without having proven that the consequences […] directly derived from it are offset by the gains in economic efficiencies generated ; and considering that the conditions proposed by the notifier do not comply with the requirements of Law No. 4,956 / 2013 on the Defense of Competition and Decree No. 1,490 / 2014, as they do not contribute […] to economic and social progress, a sufficient contribution to offset the restrictive effects on competition , since there is […]directly and specifically linked to overcoming […] the strengthening of its dominant position.

Some of the rationale behind the Resolution are set out below:

Among export refrigerators sold 80% of beef in natura nationwide.

Athena Foods Group is the one who leads the ranking of exporters of meat in natura from Paraguay, which necessarily affects their ability to purchase cattle for slaughter and availability of products (meat) for the domestic market.

Indicators of the market shares of meat in natura nationwide shows that the Athena Foods Group is the leader, with market shares than double its immediate follower.

The Athena Foods Group was also, during 2019, the leader in the acquisition (purchase) of cattle for slaughter, doubling those of its immediate follower and five times those of the other meat processing plants.

So far in 2020, the Athena Foods Group maintains its leadership in purchases, buying almost double its immediate follower and widening the gap compared to the third.

If the operation is approved, the Athena Foods Group would reach purchase levels of 46.30%. Another no less data is that Athena Foods and Frigorífico Concepción SA, ex post , would be buying about 70% of all cattle for slaughter, which represents a high concentration.

Even in the scenarios proposed by the notifier, in which all cattle are included (without excluding self-supply), the Athena Foods Group maintains a market share that doubles the purchases of Frigorífico Concepción SA and quadruples those of the third buyer. Post- operation, Frigorífico Concepción SA and the Athena Food Group would continue with an acquisition quota close to 60%.

"Even with the methodology proposed by the notifier, and even expanding the number of market agents, we conclude that the differences in quotas show us a particular preponderance of the Athena Foods Group in the acquisition of cattle for slaughter," CONACOM said.

"Furthermore, if we consider that the shares of the different agents remained more or less stable, it would be possible to assume little dynamism in the market.

"If this operation is approved, in the meat sales market, whether we analyze the IHH indicator , with American or European criteria, in the different proposed scenarios, we would be in the presence of a moderately concentrated market, which raises significant concerns.

"If this operation is approved, with the data closed for 2019, in the market for the purchase of cattle for slaughter, we would be in the presence of a highly concentrated market, with a delta of 597 points, which leads us to conclude that the Athena Foods Group will strengthen its market power.

"Even considering the scenarios proposed by the notifier for the analysis of installed capacity, we have that both the average idle capacity of the sector and that of the notifier are still important.

"Similarly, in the scenario proposed by the notifier, the IHH shows us a moderately concentrated market before the operation, which would become a high concentration market, increasing by 365 points, reaching 2,595, reaching - with the American and European criteria - worrying concentration levels.

"With the data for 2020, always in the scenario proposed by the notifier, we note that the IHH goes from 2,618 to 3,035, with a variation of 418 points; Therefore, both with the American criteria and with the European criteria, we must warn that we are in the presence of a highly concentrated market, in which, post- operation, strong indications of reinforcement of a dominant position are generated.

"For the year 2020, in the scenario proposed by the notifier, the Athena Foods Group's share exceeds the dominance threshold , ex ante by 1.78 points; and, ex post, by almost 10 points," CONACOM said.

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