The former head of the Australian Competition and Consumer Commission, Allan Fels, does not expect significant competition issues to emerge when the ACCC assesses China Mengniu Dairy’s proposed $600 million purchase of a key Australian milk processor.
Professor Fels also said he would be surprised if there was a “FIRB (Foreign Investment Review Board) problem” with the plan, under which Mengniu would buy Lion’s dairy and drinks business that produces brands such as Big M, Pura Milk and Dairy Farmers.
In an interview with The Age and The Sydney Morning Herald Professor Fels said allegations in this masthead in recent days about alleged Chinese interference in Australia, including claims that a Chinese espionage ring attempted to install an agent for Beijing in a seat in Federal Parliament, were “irrelevant” to FIRB’s consideration of the Mengniu/Lion deal.
“I think Australia has an important long-term economic relationship with China to maintain, and it should at all times pursue that where there are no security issues. We shouldn’t let security concerns get in the way of standard economic transactions,” he said.
Asked if the proposed transaction presented any security concerns, he said it did not.
Professor Fels said Mengniu was not buying a competitor, adding that Mengniu’s association with South Gippsland dairy processor Burra Foods would not stop the deal. And if it did emerge as an issue it could be addressed, he said.
“The ACCC’s only concern is with the impact on domestic competition,” he said.
“Effectively Mengniu barely operates in Australia, it’s not a competitor, so there should be no competition issue.”
China’s Inner Mongolia Fuyuan Farming company, which is part of the Mengniu group, became the biggest shareholder in Burra Foods in 2016. Burra is a supplier of fresh milk, cheese and milk powder from its plant in Korumburra, but is a far smaller player than big processors such as Saputo and Fonterra.
The Mengniu/Lion deal, which needs approval from both the FIRB and ACCC, sparked controversy in some quarters on Monday when it was announced. Lion is owned by the giant Japanese brewer and food company Kirin.
It has also emerged at an extremely sensitive time in relations between Australia and China.
Tasmanian independent MP Andrew Wilkie lashed out over the deal on Monday. “There’s no end in sight to the fire sale of Australian and Australian-based companies to the Chinese,” he said.
Giovanni Di Liepo, senior lecturer in international trade law at the Monash Business School at Monash University, said if the recent allegations of Chinese interference in Australia had never emerged he would be confident the FIRB would approve the deal.
“(Now) I’m not so sure about it, I would say it’s 50/50, purely for political reasons,” he said.
“If you look at the commercial details, I’d say there’s no reason not to approve it…on the face of it you go from a foreign investor to another foreign investor.”
Dr Di Liepo, who has lived in China, said he used to buy Mengniu milk when he lived there “because it was the safest”, adding that Mengniu was a reputable company.
The deal follows the recent sale of Lion’s specialty cheese business to Canadian-based dairy giant Saputo for $280 million. Saputo now receives more milk than any other dairy processor in Australia.