The Competition Council cleared the acquisition of control over Mátratej Termelői, Kereskedelmi és Szolgáltató Kft. (hereinafter Mátratej) and Jász-Gyöngy Tej Termelői, Kereskedelemi és Szolgáltató Kft. (hereinafter Jász-Gyöngy Tej) by Hajdútej Tejipari Rt. (hereinafter Hajdútej).

The Concentration and the Parties

Hajdútej bought 100% of Mátratej`s share of capital and 62.2% of Jász-Gyöngy Tej`s share of capital (the remaining 37.8% is owned by Mátratej).

A. The Nutricia Group
Hajdútej is fully owned by the Dutch Nutricia International BV, which also owns in Hungary Numil Kft. and Nutricia Milupa Hungary Kft., which latter is a baby food producer. The milk processing Hajdútej owns Nutricia Magyarország Kft. and WÉS Rt., which is a milk processing company as well. Nutricia Kft. is a 50.5% shareholder of Szabolcstej Rt., which owns the milk processing Zalka Tej Rt.
The above-mentioned undertakings, controlled directly or indirectly by Nutricia International BV (hereinafter Nutricia Group) had a turnover of 50 billion HUF in 1999.

B. Mátratej and Jász-Gyöngy Tej Mátratej and Jász-Gyöngy Tej are milk processing companies with a turnover of 4 billion HUF and 0. 4 billion HUF in 1999.

The Parties` Position on the Market

A. The market of dairy products
There are nearly 100 milk processing undertakings in Hungary but approximately 80% of the processing is done by 8 group of undertakings. These undertakings are present with their products throughout the country through store chains. There are no reasonable substitutes for the products of milk processing. Furthermore, separated groups of goods can be distinguished within dairy products, according to the intended use, price and quality. From the beginning of the 1990-ies the import of dairy products has increased continuously. Nevertheless the import creates a competition with domestic products only in the case of creamy products creates. Each group of undertakings produces the whole range of dairy products, however they have significant differences in market shares. Due to the possibilities and the capacity surplus of the undertakings, there are no obstacles to change their product structure according to the demand.

B. The market of milk procurement
In 1999 80% of the milk was bought up from large-scale farms by the milk processing companies, which have the necessary technology to transport the milk anywhere in the country. However, to minimise the costs, milk processing companies usually purchase the milk in the region of their plants, in this case the north-eastern part of the country. The market share of the concerned undertakings is 26.1% on national level and nearly 40% in the eastern part of Hungary.

The Decision

The Competition Council stated that although Jász-Gyöngy Tej`s turnover did not exceed the 0.5 billion HUF laid down in the Competition Act, due to the simultaneous acquisition of control over Mátratej and Jász-Gyöngy Tej, the aggregate turnover of the two has to be taken into account. Consequently the concentration has to be authorised by the Competition Council.

The Council found that the distinct markets of dairy products and the market of milk procurement form the relevant product markets. In the case of the dairy products the relevant geographic market is can be defined on national level. The Nutricia Group is presented in every market, while Mátratej is active in most of the markets, while Jász-Gyöngy Tej operates only in two of them. The approximately 25% market share of the parties on the markets of important dairy products (products with significant share within dairy products) does not produce any substantial competitive concerns.

The Council found also, that due to the capacity surplus mentioned earlier, the undertakings` presence on the market regarding all product-groups and the fact that the raw material is milk every time, there is a supply substitutability in respect of the different dairy products. Considering that, it is possible that the market of dairy products has to be regarded as a homogeneous product market.

In the case of the milk procurement the Council had to decide whether the geographic market is national or regional i. e. the area of the milk plant. The milk processing undertakings try to purchase the milk in their own geographic area, but the Council examined other possibilities as well. Regarding the low transport costs and the fact, that milk preserves its characteristics with cold storage for 48 hours, the market could be national. However the economically reasonable distance of transport could be around 300 km. The Council disregarded the small producers, because they form only 20% of the parties` suppliers and generally they have no direct relation with the milk processing undertakings. On these grounds the narrowest market is the territory eastward form the Danube. On this market the undertakings concerned have a 40% market share, which does not create a dominant position, since due to the capacity surplus their real market power is smaller.

November 27, 2000. Budapest

dr. Bodócsi András sk.
Fógel Jánosné dr. sk.
Dr. Sólyom Eszter sk.
Véghelyi Ágnes