06 July 1999
Milk Marque reforms — more details

By Johann Tasker

THE government has demanded that Milk Marque reform its sales procedures, but has rejected a recommendation to break-up the farmer-owned cooperative.

The move follows the publication this afternoon of the long-awaited Monopolies and Mergers Commission (MMC) report on the supply of milk in Great Britain.

An 18-month MMC inquiry found that Milk Marque, which is responsible for nearly half of the raw milk sales in Great Britain, is exploiting its monopoly position.

The cooperative has been able to use its selling system to discriminate and control the amount of milk available to milk processors over the past year, said the report.

Stephen Byers, the Secretary of State for Trade and Industry, unveiled the reports findings, saying he wanted major changes to the way Milk Marque operates.

“Consumers pay more for their milk than they should, and the competitiveness of the dairy processing sector is being damaged,” said Mr Byers.

But an MMC recommendation to enforce a break-up of Milk Marque was rejected on the basis that it would be a “drastic step” which would adversely affect farmers.

The break-up of Milk Marque would have created one independent body to sell milk on a commercial basis as well as a second competing body to engage in processing.

Mr Byers rejected the recommendation, saying that the idea would adversely affect too many dairy producers and take too long to implement.

“An imposed restructuring of Milk Marque would be a drastic step which would affect a large proportion of the farmers in England and Wales,” he said.

“I am also conscious that this remedy would take a considerable time to put fully into affect: perhaps as long as two years.”

A wider debate about the future of Milk Marque, is now on the cards and Mr Byer has already asked the director-general of Fair Trading for further advice.

However he insisted: “It is clear that Milk Marque must reform its sales procedures.”

The director-general will report back to Mr Byers before the year-end after consulting with Milk Marque and its customers on what changes should be made.

Under the Competition Act introduced last year, Milk Marque will be subject to prohibitions on anti-competitive behaviour and abuse of market power from next March.

The government has also accepted an MMC recommendation to implement a number of interim remedies to prevent Milk Marque abusing its market power in the meantime.

The MMC concluded that Milk Marques planned increase in its milk-processing capacity was likely to operate against the public interest by extending its monopoly.

Milk Marque “should not be allowed to extend its processing activities in this way,” said Mr Byers.

Milk Marque would be asked not take any further steps towards extending its processing interests without first seeking permission to do so, he concluded.