Pig producers and pork processors have welcomed the national competition regulator's decision to continue to investigate JBS Australia's proposed acquisition of Rivalea Holdings.
The Australian Competition and Consumer Commission has raised preliminary competition concerns over the proposed merger.
The ACCC pointed out, If the acquisition proceeds, JBS would have a significant presence in pig farming, export accredited pig abattoirs, and smallgoods through its Primo brand.
"The ACCC's preliminary view is that while JBS and Rivalea do not compete closely, the proposed acquisition may give rise to vertical integration concerns," ACCC deputy chair Mick Keogh said.
Rivalea is the majority owner of Diamond Valley Pork, Melbourne, which currently provides service kills to third parties.
"We are concerned that JBS' existing interests may give it the incentive to restrict access to service kills at the Diamond Valley Pork abattoir, as well as frustrating access to fresh pork for its downstream rivals in smallgoods production and pork wholesaling," he said.
"Our concern is not limited to JBS potentially denying access to processing facilities, it's also about the price and terms on which access would be provided," Mr Keogh said
The ACCC believed the proposed acquisition was unlikely to raise horizontal overlap concerns about the acquisition of slaughter weight pigs, supply of service kills or pork processing, as JBS and Rivalea did not compete closely.
The ACCC is seeking further information from interested parties by September 30.
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Meat processor BE Campbell was also seeking to buy Rivalea.
Managing director Ted Campbell said he was pleased the ACCC had recognised competition concerns in its statement of issues.
"We welcome the ACCC's decision to continue to investigate the potential negative impact on competition in the Australian pork industry should the JBS deal proceed," he said.
"We look forward to making a submission to the ACCC and encourage others who share our concerns about JBS's increased market power to do the same."
Victorian Farmers Federation Pig Group president Tim Kingma said the ACCC review was welcome.
The VFF raised concerns about third-party kill access at Diamond Valley Pork directly with JBS and the ACCC.
"Victorian pig farmers require water-tight assurances that access will not be restricted or priced unfairly," Mr Kingma said.
"We already work on thin margins given the rising costs of feed and other inputs. We don't need increased processing costs."
Stanhope pig farmer John Bourke said the job of the ACCC was "pretty simple".
"They've made a statement that there is a conflict of interest, " Mr Bourke said.
The owner of 20 per cent of Diamond Valley Abattoirs should be allowed to take a controlling interest in the plant.
"The people that run that abattoir have always supported the small farmer - JBS' charter doesn't support the small farmer.
"They have the chance, the have owned Primo for five years and haven't increased their domestic kill."
Imported pork was cheaper than the domestic market.
"If we had to supply pigs at import prices, every farmer in Australia would go broke."
High Steaks, Ballan, pork processor Jim Willis said he remained concerned about the proposed acquisition.
He said there had been issues with service kills at JBS' Port Wakefield SA abattoir.
JBS provides pig processing services for a major retailer and other customers, who buy the pigs from the producer and have them slaughtered for a fee at Port Wakefield.
"I know there was one company that has left Port Wakefield, because they couldn't get their pigs killed on a Monday," he said
"If you are a wholesale butcher, you can't operate like that.
'It's one thing to say they will keep contract killing for people, but the devil's in the detail."
He said he'd be happy to have an assurance that contract kills would continue "at least in the short term" until producers could explore other options.
"They could say we are only going to kill pigs on a Thursday and Friday, which would be useless, or they will be $50 ahead, instead of $25 a head.
"If they change the goalposts, we are all going to be in trouble."
JBS Australia acknowledged the ACCC statement of issues.
Chief executive Brent Eastwood said the company had engaged constructively with the ACCC as it had on other mergers undertaken in Australia.
He welcomed the preliminary view that JBS and Rivalea did not compete in the acquisition of slaughter weight pigs, supply of service kills and pork processing.
"While no 'issues of concern' were identified by the ACCC, we acknowledge the two 'issues that may cause concern' that they have identified for further consultation around third party processing at DVP and access to fresh pork for downstream businesses," Mr Eastwood said.
"JBS intends to provide a comprehensive response to the ACCC regarding these matters during this next phase of public consultation."
JBS has repeatedly and publicly said it would continue to provide service kills at DVP and had provided those assurances in writing to all existing DVP customers and the ACCC.
The ACCC's final decision will be released on December 9.