Commerce Commission raises concerns that proposed acquisition could weaken growers’ bargaining position and reduce competition
New Zealand fresh produce growers could face lower prices, higher commission rates, and less favourable trading terms if J&P Turner’s (JPT) proposed acquisition of T&G Fresh goes ahead, the country’s competition regulator has warned.
In a document published on 10 September, the NZ Commerce Commission stepped up its scrutiny of the deal, saying it is not currently satisfied that the transaction would avoid a substantial reduction in competition.
JPT, owner of produce wholesaler Fresh Direct, applied in June for clearance to acquire up to 100 per cent of T&G Fresh from T&G Global.
In the document, known as a Statement of Issues, the Commission said its investigation would now focus particularly on potential consequences for growers that sell their fruit and vegetables through wholesalers.
It said the merged business could potentially “reduce prices/increase commission rates or offer worse terms or reduced services to growers”, and suggested growers might be more exposed to the exercise of market power than customers buying produce from wholesalers.
“The majority of concerns raised with us to date have been regarding the potential effects of the Proposed Acquisition on the acquisition of produce from growers,” it stated, noting that wholesale customers were likely to have greater visibility of market prices and potentially greater negotiating strength.
Growers, by contrast, “may have less ability to resist any reductions in price or worsening of terms from wholesalers, and may have less visibility over retail/end prices”.
Fresh Direct and T&G Fresh are both national ‘full-service’ wholesalers, with MG Group the only other major full-service wholesaler operating nationally, according to the Commission.
JPT has rejected the suggestion that the acquisition would substantially lessen competition. It argues that the combined business would retain only a modest market share, would face competition from MG and other distributors, and would be constrained by growers and retailers increasingly trading directly with one another.
It has also argued that the perishability of fresh produce naturally restricts wholesalers’ ability to move prices away from competitive levels.
The Commission stressed that its Statement of Issues represented preliminary views and that it had not made a final decision on whether to approve the acquisition.
It is seeking further submissions from JPT, T&G Fresh, growers and other interested parties by 23 September, with responses to those statements due on 5 October.
A final decision is currently expected on 5 November.
