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A diverse group of antitrust experts, national consumer organizations and major farm groups have joined forces to announce their opposition to Nestle's $10.1 billion merger with Ralston Purina. If regulators approve the deal, Swiss-based Nestle would become the world's biggest pet food company and control roughly 45 percent of the $7 billion U.S. pet food market.
Representatives from the American Antitrust Institute, the Consumer Federation of America, The Consumer Alliance, the National Consumers League, the Organization for Competitive Markets and the National Grange
urged the Federal Trade Commission (FTC) to block the merger.
"This is a dog of a deal, no bones about it," said Albert A. Foer, president of the American Antitrust Institute, an independent, Washington-based nonprofit group that emphasizes the importance of competition to in the U.S. economy. "Fido and Fifi are not the only consumers harmed if the Nestle- Ralston Purina deal is finalized. Nestle would become a pet-food Goliath that could muscle competing brands off the supermarket shelf and collude with the giants of the
grocery industry to raise prices," Foer said.
Arthur S. Jaeger, assistant director of the Consumer Federation of America (CFA), warned that the Nestle-Ralston Purina deal "could very likely have a serious negative impact on American consumers" because of the Swiss-based company's dominance of the pet food market. After the merger, Nestle would
be three times the size of its nearest competitor in the U.S. market, Jaeger said.
"The U.S. economy thrives on robust competition and this deal violates that
principle," he added. The CFA is a coalition of approximately 285 consumer organizations.
Michael C. Stumo, general counsel of the Organization for Competitive Markets (OCM), warned that "the cycle of mergers to acquire market power in food processing, manufacturing and retailing must be halted. The FTC should disallow this merger and send a signal that the food industry is too concentrated." OCM is a nonprofit
group working for fair markets for farmers, ranchers, consumers and rural communities.
Leroy Watson, legislative director of the National Grange, a nationwide farmers' organization, agreed. "Every day, America's farmers and ranchers struggle to survive in an increasingly concentrated agricultural economy, with fewer and fewer open, transparent and competitive markets," Watson said. "This merger is anti-competitive and
will reduce prices for farmers. The law is clear: Excess buyer market concentration, known as monopsony power, is just as bad as monopoly power," Watson added.
On March 2, the FTC requested more information from Nestle and Ralston Purina about the deal. Meanwhile, the European Union on July 12 announced an extension of its review of the Nestle-Ralston Purina merger until July 30.
The Nestle-Ralston transaction is just one of many mega-mergers before federal and international regulators. Global giants are transforming the food industry. Since Jan. 1, 2000, 13 major food mergers and acquisitions
totaling $85.49 billion have been announced, according to New York City-based Datamonitor.
The 10 largest multinational food companies accounted for roughly $184 billion in sales in 2000. In the first quarter of 2001, the dollar volume of food mergers was up 109 percent over the first three months of 2000, according to Thompson Financial. Pet food is one of the fastest growing segments of the food industry, up 20 percent worldwide since 1995.
The FTC is reviewing several other food company mergers. The commission raised so many tough questions about a proposed merger between the nation's second and third largest baby food companies that a federal court
ruling ended H.J. Heinz's $185 million buyout of Beech-Nut.