CANBERRA, AUSTRALIA – The Australian Competition and Consumer Commission (ACCC) recently published its concerns about JBS Australia Pty Ltd.’s proposed acquisition of Rivalea, a pork producer and processor with operations in Southern New South Wales and Victoria.
Rivalea accounts for 26% of the hogs processed in Australia. In June, JBS S.A. signed an agreement to acquire 100% of Rivalea Holdings and 100% of Oxdale Dairy Enterprise from Singapore-listed food company QAF Limited for A$175 million ($127 million). The ACCC said that, if approved, the proposed acquisition will give JBS Australia, a unit of São Paulo, Brazil-based JBS S.A., a significant presence in pig farming, export-accredited pig abattoirs, and smallgoods through its Primo Smallgoods Group which JBS acquired in 2014 for $1.25 billion.
“We are concerned that JBS’ existing interests may give it the incentive to restrict access to service kills at the Diamond Valley Pork abattoir, as well as frustrating access to fresh pork for its downstream rivals in smallgoods production and pork wholesaling,” said Mick Keogh, ACCC deputy chair. “Our concern is not limited to JBS potentially denying access to processing facilities, it’s also about the price and terms on which access would be provided.”
Under the terms of the agreement, JBS will acquire pig grower farms; 80% of shares in the Diamond Valley Pork abattoir and processing facilities in Laverton, Victoria; the abattoir, processing facilities and pig farms located at Corowa, New South Wales; and pork brands including St. Bernard’s Free Range Pork, Riverview Farms and Baxters Pork.
The Diamond Valley Pork abattoir provides contract slaughter services, or service kills, to third parties. The commission is concerned that “JBS may have the incentive, particularly due to its ownership of Primo, to frustrate service kills at that abattoir by increasing prices, offering less favorable terms, or foreclosing access.”
Available information indicates that Rivalea does not have the commercial incentive to engage in this conduct, however the commission said it is investigating the issue.
“JBS has publicly stated that the proposed acquisition will enable them to expand into pig production and intends to grow the use of domestic pork in JBS’ Australian operations, particularly within its Primo business,” according to the ACCC. “Market participants have raised concerns that post-acquisition, JBS may prioritize the service kills of Rivalea pigs or pigs that are used as inputs for its Primo business and/or wholesale supply of fresh pork. This may have the effect of decreasing DVP’s capacity for third party service kills or the terms of the service kills (e.g., the timing and scheduling of the kills) becoming less favorable.”
The ACCC is also concerned that JBS may raise prices for fresh pork or reduce supply to competing smallgoods producers and pork wholesalers. The agency is considering whether rival smallgoods producers and wholesalers’ reduced access to fresh pork or increased costs may also impact retail supply.
The ACCC is asking for comments from interested parties, particularly on the following key issues:
- the extent to which the cost of service kills and processing influences the region where a customer acquires their pigs from
- the likelihood of new entry/expansion in pig production and/or service kills
- the distribution and transportation processes for pig carcasses and boned pork, including the distance transported
- how pork is procured at the wholesale level and the extent to which the abattoir/processor has limited visibility and control over the flow of pork to smallgoods producers and pork wholesalers
- the main factors smallgoods producers consider when acquiring fresh pork and the extent to which imported pork is substitutable with fresh pork, and
- the level of competitive constraint from imported pork on the domestic fresh pork
- supply chain, particularly for smallgoods producers.
The deadline for submissions is by 5 p.m. Sept. 30, 2021. The ACCC intends to publicly announce its final view by Dec. 9, 2021. However, the timeline may change. A Public Competition Assessment explaining the commission’s final view may be published following the public announcement. Read the ACCC’s full Statement of Issues.