The European Commission (EC) confirmed yesterday that it has opened an in-depth investigation to assess the proposed $36bn acquisition of Kellogg’s and Pringles maker Kellanova by US confectionery giant Mars due to concerns it could lead to higher prices for consumers.
Hours later, it was revealed that US antitrust regulators had cleared the deal, which was announced last August, with an FTC statement saying it did not meet the standard for an anticompetitive merger.
However, the move by the EC could force Mars to divest assets to address the competition concerns or risk the deal being blocked. The company had expected the transaction to close towards the end of 2025.
The Commission noted that both parties have strong positions in several product markets in multiple Member States, with its preliminary investigation indicating that, by enlarging its product portfolio with the addition of Kellanova’s brands, Mars could increase its bargaining power vis-à-vis retailers. As a result, the regulator suggested that the enlarged firm could be in a position to use this increased leverage to, for example, extract higher prices during negotiations, which in turn would lead to higher prices for consumers.
The EC revealed that several retailers across the EEA have raised concerns about Mars’ increased bargaining power, should it be able to add Kellanova’s “must-have brands” to its existing portfolio. It highlighted that retailers could be forced to accept higher prices in order to avoid not being able to offer the products of Mars and Kellanova.
EU antitrust chief, Teresa Ribera, commented: “By acquiring Kellanova, Mars will add several very popular brands of potato chips and cereals to its already broad and strong product portfolio. As inflation-hit food prices remain high across Europe, it is essential to ensure that this acquisition does not further drive up the cost of shopping baskets.
“Our in-depth investigation will assess the transaction’s impact on the price of these companies’ products for consumers in the EEA (European Economic Area).”
Mars stated that it was disappointed with the EC’s decision, but it remained optimistic over the outcome of the transaction.
“We remain confident the pending combination of Mars Snacking and Kellanova’s complementary footprints and portfolios will deliver more choice and innovation to consumers,” said Mars in a statement.
“We look forward to delivering the benefits of the pending transaction to all Mars and Kellanova stakeholders.”
The Commission has set a 31 October deadline for its decision on the deal.
NAM Implications:
- Key will be the resulting delay and uncertainty…
- …in the face of which there is a danger that ‘the good guys will leave’.
- Watch this space…
