OFT Refers Animal Rendering Merger to the Competition Commission

Jack Humphrey, Regulatory journalist
March 15, 2012 /

The OFT has referred the anticipated acquisition by Linergy Limited of Ulster Farm By-Products Limited to the Competition Commission for further investigation. Linergy and Ulster Farm are two of the three renderers of animal by-products in Northern Ireland.

The phrase ‘animal by-products’ refers to what remains of an animal after meat and offal for human consumption, and other uses, has been removed. Linergy and Ulster Farm are both active in the processing of Category 1 (high risk of BSE) and Category 3 (lower risk of BSE) animal by-products under the relevant regulations.

The OFT found that the merger would result in the parties facing only one competitor for Category 1 rendering and no current competitors for Category 3 rendering in Northern Ireland, and that the competitive constraint from the Republic of Ireland (and from Great Britain) is weak.

The parties are also active in the processing of fallen stock, which are animals that have died on farms and therefore need to be disposed of by the farmer, often through the National Fallen Stock Scheme. The vast majority of fallen stock in Northern Ireland is processed by either Linergy or Ulster Farm, and there is only one other competitor in Northern Ireland. The OFT found that there is no evidence of a competitive constraint from the Republic of Ireland (or from Great Britain).

The OFT’s investigation concluded that there is a realistic prospect that the merger would result in a substantial lessening of competition in relation to the processing of Category 1 and Category 3 animal by-products and the processing of fallen stock in Northern Ireland. Accordingly, this merger requires further investigation by the Competition Commission.

Amelia Fletcher, OFT Chief Economist and the Decision Maker in this case said: “We were concerned that animal waste producers in Northern Ireland, who are obliged by law to purchase rendering services, might be disadvantaged by this merger. As a result of the merger, there would be very little remaining competition amongst Northern Irish renderers, and this could lead to higher prices for meat plants and farmers, and ultimately for consumers. We have therefore asked the Competition Commission to undertake an in-depth investigation.

“The Competition Commission’s review period is scheduled to end on 29 August 2012, although this period may in some circumstances be extended.”

The disposal and processing of animal by-products and fallen stock is regulated and disposal must be in accordance with UK and European law. The relevant regulations categorise animal by-products according to their risk of transmitting bovine spongiform encephalopathy (BSE), and require the different categories to be treated differently at all stages.

There are three categories of mammalian material (Category 1, Category 2 and Category 3), each requiring a separate licence. There are no Category 2 plants in Northern Ireland. In Northern Ireland, the relevant licences are granted by the Northern Ireland Department of Agriculture and Rural Development (DARD).

 

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