FCCA approved Valio’s application for an amendment to the terms concerning the sales obligation of raw milk

On 11 December 2017, the Finnish Competition and Consumer Authority (FCCA) approved an amendment to the terms related to Valio’s sales obligation of raw milk. With the amendment, Valio’s competitors will be set limits to the maximum amount of skimmed milk and raw cream they can buy monthly from Valio.

According to the terms and conditions of the merger, dating to 2000 and 2004, Valio must sell annually a maximum total amount of 185 million litres of raw milk to its competitors in the domestic market. The competitors can buy the product not only as raw milk, but also as a milk component such as skimmed milk or cream. On 9 October 2017, Valio filed an application with the FCCA, proposing an amendment to the terms that would set maximum limits to component purchases of skimmed milk and raw cream.

The Finnish Competition Act gives the FCCA the authority to, “upon application, lift a condition attached to the implementation of a merger or mitigate it, due to a significant change in market conditions or another substantial cause”. As a rule, an amendment to the terms and conditions is an exceptional measure.

According to the analyses by the FCCA, the market conditions have, with regard to the component purchases, changed permanently compared to the situation prevailing at the time the terms and conditions were set. The world market prices of milk components have fluctuated greatly after 2007. From the milk quota, the competitors purchase those components that have the best profit expectation at the time, leaving Valio the responsibility for refining the less profitable component. The milk reception and joint processing capacity of the competitors has also increased, which has reduced the need to purchase milk components that have been already separated.

According to the FCCA’s assessment, the amendments proposed by Valio in its application as the monthly and customer-specific maximum limits for skimmed milk and cream will continue to allow entry into the field, sufficiently safeguard competition, and do not cause undue hardship to the milk quota customers.

The application now approved does not affect the application filed by Valio on 1 October 2015 with the FCCA, concerning the lifting of the entire sales obligation of quota milk. This application is still pending at the FCCA.

The official version of the decision will be published on the FCCA website at a later date.