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The takeover of Wrigley by Mars is not likely to face serious regulatory problems in the U.S. nor in Europe, several independent competition lawyers interviewed by dealReporter said.
In the U.S., the deal is likely to be reviewed by the Federal Trade Commission, said a D.C. based antitrust attorney. The deal will also fall under European Commission jurisdiction, as opposed to with national regulators, but minor overlaps and the low possibility of portfolio effects should not put the deal at risk, confirmed both the EU and US competition attorneys.
The European attorneys reported that a phase 1 clearance was easily possible in the EU. The D.C. based antitrust attorney similarly predicted that a lengthy review in the US was unlikely.
The D.C. antitrust attorney explained that FTC will likely form highly specific product definitions. Without a plethora of product knowledge, something that few organizations would have outside of the involved parties and possibly their competitors, the D.C. attorney speculated that an accurate antitrust analysis would be extremely difficult to mimic. The FTC has subpoena power and will have access to internal memorandum, marketing research and pricing data.
He remarked that in his initial analysis, using industry reporting categories, the only product market that may provide concern is the “non-chocolate chewy candy” market. One of the European lawyers echoed his American colleague and speculated that the EC might decide to construct a new market for breath fresheners and/ or fruit based snacks, which could not only include some of Wrigley’s chewing gums but possibly also a Mars product like Starburst.
Another European lawyer noted that the EC was likely to define chewing gum as a separate market as it could not substitute for sugary confectionery.
The European lawyers explained that in the past the EC had subdivided the broader confectionery market in salty and sugary products, and, within sugary, between sugary confectionery and chocolate based products, with numerous submarkets in the chocolate segment. Markets would be assessed on the national level.
However, all lawyers agreed that overlaps would only be minor whatever market definitions would be applied. Specifically, if chewing gum was seen as a market on its own it would not cause a problem as Mars was not in that industry. One lawyer noted that even if a horizontal problem was identified it would only be small and could easily be solved by a divestment.
Another issue the EC is likely to look at is whether the combined parties would have greater power when buying raw materials from their suppliers as well as on the retail side. The most likely contentious material is sugar, where the combined entity would have a worldwide demand amounting to around 15% of the market, one lawyer said. Two of the European lawyers agreed that this was not big enough to exert overwhelming market power on suppliers and would therefore not cause problems.
On the retail side concerns might exist that the merged companies could force supermarket chains or wholesalers to take on the entire product portfolio. The increased power to force retail outlets to display and market the merged companies’ products is another area of concern. Another lawyer added this could, for instance, involve positioning of racks in the checkout area of supermarkets or displaying Mars and Wrigley products jointly in the same rack.
Similar portfolio effects have been examined by the EC in the past, but the EC would need very clear evidence to block a merger based on that argument, the lawyers agreed.
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