By Decision No. 941/24.11.2022, the Commission on Protection of Competition (CPC, the Commission) has approved the acquisition of sole control by „VP Brands International“ AD over „Veda“ OOD, subject to the commitments proposed by the parties.
During the investigation in Phase I, the Commission found that the concentration will have an impact on the markets for the production and sale of vinegar and vinegar substitutes (acid products) on the territory of the country.
Within the preliminary investigation, the Commission established that there is a partial substitutability between the different types of vinegar on the one hand and between vinegar and acid products on the other hand, given the differences mainly in production technology, nutritional composition and prices.
With regard to the market of wholesale of bottled vinegar, the Commission found that the proposed transaction would lead to the creation of a dominant position of the united group. The merging companies „VP Brands International“ and „Veda“ are leading market participants prior to the notified transaction.
Given the consolidated market share of the parties in the transaction, the Commission has concluded that none of the other competitors in the relevant market has no a market position that would constitute a significant competitive restriction for the united group. Despite the fact that both vinegar producers and distributors/trade chains are active in the concerned market, there is/are no competitor(s) whose market behavior could have a disciplinary effect over the policy of the future new structure.
Veda is one of the main manufacturers of vinegar and acid products for private labels owned by the independent undertakings, that compete in retail sales with Veda's and the acquiring company's own brand products.
On the analyzed markets exist certain economic barriers to entry, such as specific production equipment (vinegar acetator) at considerable value; storage equipment; investments for bottling of vinegar/ acid products, for distribution channels, etc.
Based on the information collected, the Commission concluded that the notified transaction increase the risk for competition in terms of reducing the number of competitors, having a real opportunity to exert competitive pressure over the new united group. In this regard, the planned concentration gives rise to serious doubts that, as a result of its implementation, the effective competition on the relevant market will be significantly impeded.
In connection with the concerns raised by the Commission, on the basis of Art. 80, para. 4 of the Law on Protection of Competition (LPC) „VP Brands International“ proposed commitments in order to eliminate the anti-competitive effects of the transaction, namely:
1. Guarantee (preservation) of capacity and providing it available to independent undertakings for the production of vinegar and acid products under „private“ labels;
2. Suspension of the usage of a certain trademark for the production and sale of acid products, as of the beginning of the acquisition.
The Commission conducted a market test of the proposed changes to the conditions of the concentration (commitments) in order to assess whether their scope, expedience and efficiency could address the concerns about the competitive environment and to preserve the conditions of effective competition in the relevant market.
The market test found that the first remedy is aimed to preserve effective competition as a whole, not at individual market players. The proposed changes to the conditions of the concentration will provide sufficient production capacity for the independent undertakings that sell bottled vinegar under a private label and which are direct competitors to the united group in retail sales, and at the same time it is a premise that these undertakings will have a restrain effect over the parties in the notified transaction.
The Commission also considers that an adequate mechanism for annual reporting has been foreseen, which enables the control fulfillment by the CPC regarding the implementation of the specific commitment.
In respect to the second proposed commitment, the Commission considers that by implementing it, the united group will reduce its market presence in the relevant market and will create an opportunity for development and/or entry of new players in the affected market.
Given the above considerations, the Commission accepts that the proposed commitments are sufficient in scope and appropriate to eliminate the serious doubts regarding possible anti-competitive effects. In this regard the Commission considers that the concentration should be cleared according to the commitments proposed by the parties to the transaction.
The full text of decision No. 941/24.11.2022 is
available in the public electronic register of the CPC at http://reg.cpc.bg/ only in Bulgarian language.
