Section I: Introduction

Section I(a): Background Information

The European dairy industry has recently witnessed a significant development that is set to reshape its market dynamics. Indeed, Lactalis, a France-based multinational and the world’s largest dairy products group, has successfully acquired Ambrosi Spa, an Italian company renowned for its expertise in parmesan production.[1] This acquisition signifies a strategic expansion for Lactalis, further consolidating its position in the global dairy market.[2] Ambrosi Spa, with its specialization in parmesan, represents a valuable addition to Lactalis’s portfolio of esteemed brands.[3] This acquisition will undoubtedly enhance Lactalis’s product range, especially in the cheese segment, and strengthen its market presence in Italy, one of the most important countries in cheese production.[4]

However, beyond the business implications, this acquisition also brings into focus the complex legal landscape that governs such transactions. In particular, compliance with European competition law has been a key aspect of the transaction. On April 19, 2023, both parties informed the European Commission, as required by Article 3(1)(b) of the Merger Regulation, of their will for Ambrosi to be acquired by Lactalis by way of the purchase of shares.[5] Following an initial review, the Commission has determined that the proposed acquisition could fall within the scope of the Merger Regulation[6]. The goal of this regulation is to prevent mergers and acquisitions that would be likely to significantly reduce competition within the unified market of the European Union[7].

The approval from the European Commission indicates that the deal has been deemed to not significantly impede effective competition in the relevant market.[8] This decision underscores the rigorous assessment process that such transactions undergo to ensure they align with European competition law. Therefore, this article will delve deeper into the legal intricacies of this acquisition, shedding light on the fundamental step regarding the relevant market definition used by the European Commission to evaluate whether a transaction falls within the scope of the Merger Regulation or not.

Section I(b): Aim, Significance and Limitations

This article serves as the inaugural section of a two-part case study focusing on the Lactalis/Ambrosi Acquisition (M.10876). The overarching objective of this duo of articles is to provide an in-depth analysis of the European Commission’s practices concerning mergers and acquisitions through the case study of Lactalis/Ambrosi. This analysis will offer valuable insights into the workings of European competition law, contributing to a broader understanding of the European Merger Regulation. To achieve this objective, this first article will exclusively focus on the European Commission’s methodological approach towards defining the relevant market in this particular case. The second article will exclusively focus on the assessment of market power.

Choosing this particular case for analysis is a strategic decision. Given its recent occurrence, it offers a timely and relevant insight into the current practices and trends in the application of European competition law. Plus, the topic of this case, cheese production, is both interesting and easy to understand. This makes it a perfect example to help simplify and explain the complex legal and regulatory considerations that govern mergers and acquisitions, all while discussing a subject that many find enjoyable.

However, while this article strives to provide a comprehensive analysis, it is important to acknowledge its limitations. Firstly, the application of European competition law is highly context-specific, and the conclusions drawn from this case may not necessarily apply to all mergers and acquisitions. Secondly, due to the lack of novelty and absence of groundbreaking legal aspects, this particular case has garnered minimal academic interest. Consequently, the analysis and conclusions presented in this article are primarily based on the author’s interpretation of the European Commission’s decision and the limited academic resources available.

Section I(c): Outline

This article is structured into four sections. Section I serves as an introduction and outlines the aim of the present article: to provide a comprehensive analysis of the Lactalis/Ambrosi case. Following this, Section II delves into the heart of the relevant market analysis of the case at hand and will be divided into two subsections. The initial subsection is dedicated to defining the relevant product and geographic market, while the subsequent subsection concentrates on the evaluation of competition. Subsequently, Section III presents a comprehensive legal commentary, dissecting and evaluating the European Commission’s approach regarding its definition of the relevant market in this case. Concluding the article, Section IV summarizes the key findings of this article.

Section II: Unraveling the European Commission’s Market Definition

Section II(a): Product Market

  • Overview

Primarily, it is crucial to recall the aim of defining the relevant market, which encompasses both the product and geographic market.[9] A relevant product market includes all the products or services that customers see as similar or replaceable due to the products’ characteristics, such as how much they cost, and what they’re used for.[10] A relevant geographic market is the area where the firms sell their products or services and where the conditions of competition are sufficiently similar.[11]

The European Commission employs a meticulous methodology in its assessment of market definition. Indeed, the European Commission starts by identifying that both companies are active in the broad market of production and supply of dairy products.[12] From there, dairy products are divided into two main markets: cheese and butter.[13] In alignment with established case law[14], the former is further segmented into five distinct relevant product markets: fresh cheeses (encompassing varieties such as Mozzarella, Ricotta, Mascarpone, and Robiola), hard cheeses (including Parmigiano Reggiano, Grana Padano, and Pecorino), semi-hard cheeses (such as Asiago, Fontina, Paste Filate, and Provolone), soft cheeses (including Crescenza, Taleggio, Gorgonzola, and Brie), and hard/semi-hard cheeses (comprising Dutch-type cheese, Emmental, Tilsit, Cheddar, Manchego, and Danbo)[15]. In order to further differentiate the cheeses, the European Commission will determine their interchangeability through, for instance, the Small but Significant Non-transitory Increase in Prices Test (SSNIP Test) or consumers’ preferences.

Further refining its market definition, the European Commission also considers four additional factors, established by precedents, that could potentially segment the cheese supply markets.[16] Firstly, the type of milk used for cheese production, such as cow or buffalo milk, is taken into account.[17] Secondly, the sales channel through which the cheese is supplied is also considered, with distinctions made between modern retail channels like supermarkets and hypermarkets, traditional retail channels like market cheese shops, and the Out-Of-Home (OOH) channel.[18] Thirdly, the presence or absence of a Protected Designation of Origin (PDO) is evaluated, differentiating cheeses produced in a specific geographical area and according to particular production methods from those that are not.[19] Lastly, the distinction between branded cheese, which bears the manufacturer’s brand, and private label cheese, which carries the retailer’s brand, is considered[20]. However, this distinction is relevant only in the retail sales channels and not in the OOH channel.[21]

  • Hard Cheeses

Beginning with the category of hard cheese, the European Commission’s analysis reveals that both parties are actively involved in the supply of various Italian-type hard cheeses, with Grana Padano, Parmigiano Reggiano, and Pecorino Romano being the primary varieties.[22] Based upon its precedents, the European Commission has previously assessed that Grana Padano and Parmigiano Reggiano are not regarded as interchangeable by a majority of consumers.[23] Additionally, consumers have expressed that if prices of Parmigiano Reggiano or Grana Padano were to increase, they would not switch to other Italian-type hard cheeses, including Pecorino Romano.[24] This is due to the fact that Parmigiano Reggiano and Grana Padano are considered, by consumers, to be “premium products” compared to other cheeses[25] based on their unique taste, their price difference, the type of recipes in which they are used, and their reputation[26]. The feedback from a majority of customers and competitors suggests that if the price of Parmigiano Reggiano were to increase, end-users would likely switch to Grana Padano, and vice versa, although this view is debated.[27]

After assessing the particularities of hard cheeses, the European Commission discusses the competitive dynamics between branded and private-label products in the Italian-type hard cheese market, particularly focusing on Parmigiano Reggiano, Grana Padano, and Pecorino Romano.[28] Firstly, market participants suggest that brands have limited importance for PDO Italian-type hard cheeses due to the high value added by the PDO marking itself, which is perceived as a sign of quality by consumers.[29] Secondly, the Commission notes that if prices for branded Parmigiano Reggiano and Grana Padano were to significantly increase, a significant proportion of consumers would switch to private-label products.[30] Thirdly, the sales data from Ambrosi supports the high degree of substitutability between branded and private-label products[31]. The majority of Ambrosi’s revenues come from the sale of unbranded products and products sold under private labels, with only a small proportion corresponding to sales of its own brands.[32] In light of these findings, the Commission concludes that the competitive assessment of Italian-type hard cheeses will consider branded and private-label products jointly, without segmentation.[33] This suggests that the Commission views branded and private-label products as part of the same competitive landscape in the Italian-type hard cheese market.

As the last step of the assessment of the category of hard cheeses, the European Commission discusses the competitive dynamics between different sales channels in the Italian-type hard cheese market.[34] The Commission’s market investigation reveals that a vast majority of customers and competitors perceive a difference in the price, volume and content of orders, as well as the conduct of negotiations, between supermarkets (modern retail) and traditional retailers (over-the-counter stores), as well as between supermarkets and OOH channels.[35]

The European Commission concludes that the competitive assessment will be carried out at the narrowest plausible level, distinguishing between PDO Parmigiano Reggiano, PDO Grana Padano, PDO Pecorino Romano, and other Italian-style hard cheeses and between the sales channels[36].

  • Fresh Cheeses

Subsequently, the European Commission proceeded to analyze the supply of fresh cheeses. Drawing from its precedents, the European Commission builds its assessment upon three lessons. Firstly, it was established that Mozzarella, Mascarpone, Ricotta, and Feta fall under the category of fresh cheeses.[37] Secondly, Mozzarella, Mascarpone, and Ricotta constitute separate product markets,[38] while the classification of Feta as a separate product market remains undecided by the Commission.[39] Lastly, Mozzarella is further divided into buffalo mozzarella and cow mozzarella.[40] This past lesson is further substantiated by the Commission’s assessment, which asserts that the market investigation provided definitive proof that separate relevant product markets exist for regular cow mozzarella, burrata, and buffalo mozzarella.[41] For instance, it has been assessed that consumers would not substitute cow mozzarella with either buffalo mozzarella or burrata.[42] This is due to several reasons, including the stronger and more intense flavor of buffalo mozzarella compared to cow mozzarella.[43] Furthermore, the Commission assesses that burrata tends to be perceived by consumers as a premium product compared to regular cow mozzarella.[44] Regarding Feta, Mascarpone, and Ricotta, the European Commission has opted to leave the market definition undecided as there are no competition concerns in the current case.[45] Each of them will be considered separate product markets for the competitive assessment.[46] Therefore, the European Commission established distinct product markets within the fresh cheese category for cow mozzarella, buffalo mozzarella, and burrata.[47]

Afterwards, the European Commission discusses the state of competition between private-label and branded fresh cheeses.[48] The Commission found that while many consumers view private-label products as interchangeable with branded products, brands still hold significant importance for consumers.[49] The importance of brands varies depending on the type of cheese.[50] For mozzarella, a majority of customers and competitors indicated that brands are important or very important.[51] However, for feta, mascarpone, and ricotta, brands were deemed less relevant by a majority of customers, while competitors still viewed them as important or very important.[52] The investigation also found that a significant proportion of consumers would switch to private-label products if the prices of branded cheeses were to increase by 5-10%, suggesting that private-label products do exert some competitive pressure on branded products.[53] However, the Commission also noted that price trends for branded and private-label mozzarella may not necessarily indicate close competition between the two, as price changes could be due to changes in the common cost structure of producing these cheeses.[54] Thus, the Commission determined that while private-label products do compete with branded products to some extent, this competition is not sufficient to conclude that they operate in the same market.[55]

Lastly, the European Commission conducted an investigation into the competitive conditions between different sales channels for fresh cheeses.[56] The majority of respondents indicated significant differences in pricing, order volumes, order content, and negotiation conduct between these channels.[57] As a result, the Commission decided to distinguish between these channels in its competitive assessment.[58] However, the Commission also stated that the precise market definition can be left open, as the concentration under investigation does not raise serious doubts about its compatibility with the internal market, regardless of the product market definition.[59]

  • Soft Cheeses

In the next step of the analysis, the European Commission analyzes the supply of soft cheeses. In accordance with the Commission’s historical practice, it has been determined that the market for soft cheese encompasses cheese types such as Taleggio, Gorgonzola, Crescenza, and Brie.[60] The classification of Taleggio and Magor as distinct product markets has not yet been considered.[61] The market definition for Gorgonzola remains open.[62] The present acquisition impacts the markets with regard to the supply of the cheese types Gorgonzola, Taleggio and Magor.[63] Consequently, the analysis will be confined solely to these cheeses. In the current Commission’s evaluation, it was noted that the majority of consumers in Europe would not replace Taleggio with other soft cheeses.[64] This is supported by consumer preferences, which suggest that the interchangeability between Taleggio and other soft cheeses is limited.[65] As regards Gorgonzola, a majority of consumers in Europe would consider substituting Gorgonzola with other blue cheeses.[66] This view is supported by a significant number of customers who believe that if there were a sustained price increase of 5–10% for Gorgonzola, consumers would opt for other blue cheeses.[67] Moreover, a competitor of Gorgonzola maintained that in countries outside Italy, Gorgonzola competes with other blue cheeses, such as French Roquefort and English Stilton cheese.[68] Conversely, three competitors suggested that consumers would generally not replace Gorgonzola with other blue cheeses.[69] Despite these findings, there remains considerable debate regarding the interchangeability of the product.[70] Regarding Magor, the findings are not consistent.[71] While some contend that customers would not replace Magor with other soft cheeses, others argue that, in the event of a 5-10% price increase, customers would indeed substitute Magor with other soft cheeses.[72] A slight majority of customers and competitors would replace Magor with other soft cheeses, particularly in the event of a sustained and significant price increase.[73] This suggests that Magor may not constitute a distinct product market.[74] However, a significant minority argue the opposite.[75] Therefore, the European Commission took the decision to leave the market definitions of Taleggio, Gorgonzola, and Magor open.[76]

While assessing the competition between private label and branded cheeses, specifically taleggio, gorgonzola, and magor, the European Commission found that a majority of customers viewed brands as less relevant when purchasing these cheeses, while a significant minority viewed brands as important.[77] The investigation also found that if prices for branded taleggio, gorgonzola, and magor were to increase by 5-10% in Europe, a significant proportion of consumers would switch to private label products, suggesting that private label products do exert some competitive pressure on branded products.[78] However, the Commission also noted that the market investigation results are not conclusive in determining whether branded products compete with private label products, particularly outside Italy.[79] Therefore, the European Commission decided that the precise market definition could be left open.[80]

The European Commission’s investigation into the differences in conditions of competition between various sales channels for taleggio, gorgonzola, and magor cheeses indicated that there are differences in pricing, order volumes, order content, and negotiation conduct between the sales channels.[81] This evidence supports the Commission’s decision to distinguish between these channels in its competitive assessment.[82] However, the Commission also notes that the precise market definition can be left open for the purposes of this decision.[83]

  • Semi-hard cheeses

After analyzing the supply of soft cheese, the European Commission moves on to analyzing the supply of semi-hard cheeses. In the Commission’s previous practice, the supply of semi-hard cheese included paste filate[84], which is the type of cheese mostly concerned in this case from this category. In the current assessment of the type of cheese, the majority of the responding customers indicated that European final consumers generally would not substitute paste filate with other semi-hard cheeses.[85] However, the precise market definition is left open because there are no serious doubts about the concentration not being compatible with the internal market.

The European Commission’s market investigation into the importance of brands in the purchase of paste filate cheese reveals a divergence of opinion between competitors and customers.[86] While most competitors view brands as important or very important, a majority of customers consider them less relevant.[87] The investigation also uncovers that if prices for branded paste filate were to increase by 5-10%, a significant proportion of consumers would switch to private label products, according to the majority of competitors and customers.[88] Despite these findings, the Commission concludes that the market investigation results are not conclusive in determining whether branded products compete with private label products.[89] The Commission is confident that the merger will not significantly impede effective competition and decides that the precise market definition can be left open.[90]

The European Commission’s market investigation reveals a consensus among a vast majority of customers and competitors that there is a difference in the conditions of competition, such as pricing, volumes of orders, content of orders, and conduct of negotiations, between supermarkets (modern retail) and traditional retailers (over-the-counter stores) as well as Out-Of-Home (OOH) customers.[91] Based on these findings, the Commission concludes that a distinction should be made between the sales channels.[92] However, the Commission decides that the precise market definition can be left open because the concentration does not raise serious concerns.[93]

Therefore, in conclusion, paste filate holds a unique position in the semi-hard cheese market, segmented by both brands and private label products, as well as differentiated sales channels.[94]

  • Hard/Semi-hard cheeses

As the last type of cheese, the European Commission analyzed the supply of hard or semi-hard cheese. According to the Commission’s past practice, hard or semi-hard cheeses include Dutch-type cheese (such as Gouda, Maasdam, and Edam), Emmental, Tilsit, Cheddar, Manchego, and Danbo.[95] In this case, the markets affected include Swiss-type cheese (Emmental, Appenzeller, Gruyère, Raclette, Fondue, Tête de moine, Sbrinz, Bergkase, Fromage Fribourg and Vacherin mont d’or)[96], which was not considered in its past decisions.[97] In the Commission’s assessment, the majority of the parties’ competitors and customers believe that final consumers would substitute Swiss-type cheese with other hard or semi-hard cheeses, especially in the event of a lasting and significant price increase for Swiss-type cheese.[98] This suggests that Swiss-type cheese should not be distinguished from other hard or semi-hard cheeses.

The European Commission then presents the findings of its market investigation into the importance of brands in the purchase of Swiss-type cheese.[99] The investigation reveals a divergence of opinion between competitors and customers. Indeed, while most competitors believe that brands are important or very important, a majority of customers deem them less relevant.[100] However, the investigation also reveals a potential price sensitivity among consumers. If prices for branded Swiss-type cheese were to increase by 5-10%, a significant proportion of consumers would switch to private label products, according to the majority of competitors and customers.[101] Despite these insights, the Commission concludes that the market investigation results are not conclusive in determining whether branded products compete with private label products.[102] Nevertheless, the Commission decides that the precise market definition can be left open, as the concentration does not raise serious doubts as to its compatibility with the internal market, regardless of the product market definition.[103]

Regarding the sales channels, the European Commission assesses that market dynamics and competitive pressures may vary significantly across different sales channels.[104] Based on these findings, the Commission concludes that a distinction should be made between the sales channels.[105] However, similar to its conclusion regarding the product market definition, the Commission decides that the precise market definition can be left open because the concentration does not raise serious doubts as to its compatibility with the internal market.[106]

The conclusion drawn is that Swiss-type cheese occupies a distinctive position within the hard/semi-hard cheese market, a segmentation that is delineated by both brands and private label products, as well as differentiated sales channels.[107]

  • Butter

The European Commission has conducted an in-depth investigation into the competitive dynamics of the butter market.[108] The investigation focused on several key aspects, including the differentiation between butter sold in packets and in bulk, the distinction between butter and other vegetable fats, and the potential segmentation of the market by branded and private label products.[109] The Commission’s previous practice has found that butter sold in bulk and in packets constitutes separate product markets.[110] It also concluded that butter packets are a separate market from other vegetable fats.[111] However, it left open the question of whether butter packets should be segmented by branded and private-label products.[112]

The Commission’s recent assessment found that the majority of customers and competitors believe that consumers would not generally substitute butter with other vegetable fats, such as margarine, unless there was a significant price difference.[113] It also found that consumers would not typically substitute butter sold in packets with butter sold in bulk, as these are not seen as interchangeable.[114]

Therefore, for the purposes of the current case, the Commission will carry out a competitive assessment at the narrowest plausible level, distinguishing butter from other vegetable fats and butter sold in packets from butter sold in bulk.[115] It will also distinguish between branded and private-label packaging and between different sales channels.[116]

Section II(b): Geographic Market

After defining the relevant product market, the European Commission evaluates the relevant geographic market, splitting it into cheese and butter supplies.

For the former, the European Commission assesses that most customers and competitors believe there are significant differences in consumer preferences and competitive conditions for Italian cheeses across EEA member states, particularly in consumer behavior.[117] This reinforces the Commission’s earlier finding that the most precise market for cheese, including non-Italian varieties, is at the national level.[118]

For the latter, the Commission notes that a majority of customers and an equal number of competitors perceive significant variations in consumer preferences and competitive conditions across EEA member states.[119] This supports the Commission’s previous conclusion that the most specific market for butter is national in scope[120], although it contradicts a previous decision that identified the market for bulk butter and butter oil as EEA-wide.[121]

Therefore, the relevant geographic market in this case includes, individually, Austria, Belgium, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Italy, Latvia, the Netherlands, Norway, Poland, Romania, Slovakia, Spain, and Sweden.[122]

Section II(c): Conclusion

Through the assessment of the relevant product and geographic market definition, the European Commission has identified and defined the boundaries of competition for the Lactalis/Ambrosi acquisition.

For example, the European Commission has determined that the competitive assessment will, in the category of hard cheeses, distinguish between PDO Parmigiano Reggiano, PDO Grana Padano, PDO Pecorino Romano, and other Italian-style hard cheeses and between the sales channels.[123] This implies that if Lactalis/Ambrosi supplies these specific types of cheeses in a particular country, the market shares will be calculated separately for each of these categories. In other words, each type of cheese and its respective sales channel will be considered its own unique market segment.

As another illustration of the purpose of defining the relevant geographic market, should Lactalis/Ambrosi supply Feta in France, the Netherlands, and Greece, then the market shares for Feta cheese will be calculated separately for each of these countries. This means that the competitive conditions and consumer preferences for Feta cheese in France, the Netherlands, and Greece will each be considered distinct markets.

Section III: Legal Commentary: A Critical Review of the Market Definition in the Lactalis/Ambrosi Acquisition

Section III(a): Classification of cheese, a cheese maze by the European Commission?

  • Hard cheeses, semi-hard cheeses, and hard/semi-hard cheeses?

Upon reviewing the European Commission’s assessment pertaining to cheese classification, the primary categorizations of cheeses were confusing. While the initial four classifications are comprehensible and distinctive, the last one, that of hard or semi-hard cheese, appears to be an intermediary classification which definition is questionable. Indeed, one might question the distinction between hard cheeses, semi-hard cheeses, and the category of hard or semi-hard cheeses.

In order to answer that question, it is necessary to dive into the case law that introduced these categories, the case of Lactalis/Galbani, which occurred in 2006.[124] In the 9th and 10th paragraphs, the European Commission explains the already existing classifications of cheese by the French and Italian competition authorities.[125]

Drawing upon the primary attributes that distinguish various cheeses from the consumer’s perspective, the French competition authority has accordingly divided the cheese sector in France into seven distinct categories: fresh cheeses, soft cheeses, uncooked pressed cheeses, cooked pressed cheeses, melted cheeses, blue cheeses, and goat and sheep cheeses.[126] However, this segmentation of cheese markets is tied to the specificities of the French market and would be difficult to transpose to other Member States.[127]

The practice of the Italian competition authority identifies five distinct product markets within the cheese sector.[128] These markets are specifically melted cheeses, fresh cheeses (especially mozzarella, ricotta, mascarpone, and robiola), soft cheeses (including crescenza, taleggio, gorgonzola, and brie), and semi-hard cheeses (such as asiago, fontina, paste filate, and provolone).[129]

In a later case law in 2007, the European Commission notes that the Bundeskartellamt has identified only three families of cheese, namely soft cheeses, fresh cheeses, and hard or semi-hard cheeses.[130] In this context, the existence of this category is comprehensible given the lack of distinct classifications between hard cheese, semi-hard cheese, and the amalgamated category of hard or semi-hard cheeses.

However, one year later, in the case of Friesland Foods/Campina, the European Commission addressed the specific category of hard or semi-hard cheeses.[131] Both parties, Friesland Foods and Campina, claim that they are active in the production of Dutch-type cheese, including Gouda, Maasdam, and Edam.[132] They also submit that these cheeses belong to the category of hard/semi-hard cheese, along with other hard/semi-hard cheeses (including, for instance, Emmental, Tilsit, Cheddar, Manchego, and Danbo).[133] The European Commission seems to follow its assessment in these categories.[134]

One could argue that the category of hard or semi-hard cheese is not well defined within the European Commission’s case law. As per the case law, this category primarily serves to differentiate Dutch-type cheese (Gouda, Maasdam, and Edam) from other hard or semi-hard cheeses.[135] Yet, in the current case of Lactalis/Ambrosi, where both hard cheeses and semi-hard cheeses are distinct categories, it is possible to ask ourselves whether the existence of the hard or semi-hard cheese category serve merely to maintain alignment with case law? Alternatively, could there be a rationale behind why Cheddar is not classified as a hard cheese[136] or Manchego a solely semi-hard cheese?[137] Finally, one could further question the utility of the hard/semi-hard cheese category in this particular case.

  • Swiss-type cheese, Dutch-type cheese?

The second point of contention arises from the use of umbrella terms such as “Swiss-type cheese”, which encompasses dozens of distinct cheeses, not all of which originate from Switzerland. For instance, the European Commission categorizes “bergkase”, a term that itself encompasses a range of cheeses, as a Swiss-type cheese, despite the fact that most varieties, such as Allgäuer Bergkäse and Vorarlberger Bergkäse, originate from Germany and Austria, respectively.

This raises questions about the accuracy and effectiveness of such broad categorizations. By grouping diverse cheeses under a single banner based on perhaps a few shared characteristics, the unique qualities and origins of individual cheeses may be overlooked. This could potentially lead to misinterpretation and confusion among consumers, producers, and regulators alike. Furthermore, it begs the question of whether such umbrella terms truly serve their intended purpose of simplifying the classification process or if they instead complicate it by blurring the lines between distinct cheese varieties.

A more precise classification system, one that takes into account the specific origin and unique characteristics of each cheese, may be more beneficial in maintaining clarity and accuracy in the cheese industry. For example, the International Dairy Federation (IDF) categorizes cheeses into four groups based on criteria such as moisture on a fat-free basis, fat content, the degree of calcium phosphate mineral solubilisation, and the extent of casein protein hydrolysis (proteolysis, ripening). Each of these factors, when present at higher levels, will induce softening of the cheese.[138] The cheese classes include extra-hard cheeses (encompassing, for instance, Parmesan, Parmigiano Reggiano, and Grana Padano), hard cheeses (incorporating varieties such as Gruyère and Cheddar), firm or semi-hard cheeses (like Appenzeller, Maasdam, and Gouda), and soft cheeses (such as Camembert).[139]

Section III(b): Did the European Commission over-differentiate cheeses by assuming consumers are too well-informed about their differences?

The European Commission’s approach to cheese differentiation raises questions about the assumptions made regarding consumer knowledge and behavior. It appears that the Commission has opted for an extremely granular categorization, assuming a high level of consumer discernment between different types of cheeses. This is evident in the classification of fresh cheeses, where Mozzarella, Mascarpone, Ricotta, and Feta are not only identified as distinct from other fresh cheeses but are further subdivided into separate product markets. For instance, Mozzarella is split into buffalo and cow variants based on the Commission’s assertion that consumers would not substitute one for the other due to differences in flavor and perceived quality. This assessment by the European Commission is likely to potentially overstate the differentiation between these products.

This high degree of differentiation could potentially create an overly complex market structure, where the nuances between cheese types may be lost on the average consumer. While it is true that there are discernible differences in taste, texture, and quality between cheeses like buffalo and cow mozzarella, it is debatable whether these differences are significant enough to warrant separate market classifications. For instance, concluding that consumers would not switch from burrata to cow mozzarella and vice versa, even with a price increase, seems to presume a level of discernment that may not be universally applicable. While some consumers, particularly those with a keen interest in or background in gastronomy, might make such distinctions, it’s uncertain whether the average consumer would do the same.

Additionally, the assumption that substitutability between cheeses is based on the preferences of the average European consumer may not fully capture the complexity of consumer behavior. Individual consumers are influenced by a variety of factors, including their personal taste preferences, educational background, and regional or national origin. These factors can significantly impact a consumer’s perception and preference for different types of cheeses. For instance, a consumer who grew up in a region known for a specific type of cheese may have a strong preference for that cheese, regardless of its classification or how it compares to other cheeses.

Therefore, while the European Commission’s approach to cheese classification provides a structured framework for understanding the cheese market, it may benefit from incorporating a more nuanced understanding of consumer behavior. This could include considering, for instance, cultural influences through a national survey instead of a global survey, which could provide a more accurate and comprehensive understanding of the dynamics of the cheese market.

Section III(c): Should the perspective of competitors in merger cases merely be heard or should it be given significant consideration?

Upon reviewing the European Commission’s assessment, it appears that the perspectives of competitors were given significant consideration, potentially influencing the Commission’s decisions. For instance, in the case of Swiss-type cheeses, while most competitors believe that brands are important or very important, a majority of customers deem them less relevant.[140] Moreover, if prices for branded Swiss-type cheese were to increase by 5-10%, a significant proportion of consumers would switch to private- label products.[141] The Commission still concludes that the market investigation results are not conclusive in determining whether branded products compete with private- label products.[142] This indicates that although most customers, reflecting market reality, assert that brands do not matter for this cheese variety, the European Commission continues to be undecided rather than determining that these cheeses consequently compete with one another.

While it is undeniable that competitors have useful insights, they may also be influenced by their own strategic interests rather than giving an objective analysis of market dynamics. This potential bias should significantly lessen the weight given to competitors’ opinions in merger cases, especially when they conflict with consumer perspectives. Hence, this paper argues that the viewpoints of consumers should be accorded greater significance than those of competitors in merger cases.

Furthermore, according to T. Giebe and M. Lee, relying on competitors’ viewpoints in merger cases is not always beneficial due to several reasons.[143] Firstly, competitors have their own profit interests, which may conflict with the welfare standards set by competition authorities.[144] Secondly, while competitors might provide valuable but non-verifiable information, such information should mostly be ignored due to its uncertain reliability.[145] Therefore, they conclude that competition authorities should focus on enhancing their own information gathering efforts, including obtaining verifiable information, instead of relying on competitors’ subjective communication.[146]

In conclusion, while the insights of competitors can provide valuable context and depth to an analysis in merger cases, it is crucial for competition authorities to approach these perspectives with a degree of caution. The potential for bias and conflict of interest inherent in competitors’ viewpoints necessitates a balanced approach wherein these opinions are weighed against other sources of information, such as consumer perspectives and verifiable data. As Giebe and Lee suggest, competition authorities should prioritize enhancing their own information- gathering efforts and rely more on objective, verifiable information. This ensures that decisions are based on a comprehensive understanding of market dynamics and consumer behavior, rather than being unduly influenced by potentially biased competitor perspectives.

Section IV: Conclusion

In conclusion, the European Commission’s analysis of the cheese and butter markets is comprehensive and thorough. It considers various factors such as consumer preferences, competitive dynamics, sales channels, branded and non-branded products, to define the relevant product markets. It also acknowledges the unique position of certain products within their respective markets. The Commission also takes into account the geographic scope of these markets, recognizing significant differences across EEA member states.

From this analysis, two significant observations can be discerned. Firstly, the European Commission adheres strictly to its Merger Guidelines, thereby establishing a systematic and methodical approach to its analysis. This adherence to a structured framework ensures that the Commission’s evaluations are thorough, comprehensive, and grounded in established principles and procedures.

Secondly, the Commission heavily relies on precedents in its decision-making process. This practice of referencing past decisions can be a subject of debate as it involves a degree of reliance on previous judgments. However, it is crucial to note that this approach contributes to the consistency of the Commission’s analyses. By referring to precedents, the Commission ensures that its decisions are not arbitrary but are instead based on established interpretations and understandings. This practice enhances the predictability and reliability of the Commission’s decisions, thereby fostering trust and confidence in its regulatory role.

Nevertheless, despite the European Commission’s methodological approach, its categorization of cheeses also raises several questions regarding the accuracy, effectiveness, and complexity of such categorizations. Indeed, this granular differentiation, while reflecting a high level of discernment, may overstate product differences and overlook the complexity of consumer behaviour. Moreover, the significant consideration given to competitors’ perspectives, despite their potential bias and conflict of interest, further complicates the assessment.  It is crucial for competition authorities to balance these viewpoints with other sources of information, such as consumer perspectives and verifiable data. This article argues that a more nuanced understanding of consumer behavior, incorporating cultural influences and individual preferences, could provide a more accurate understanding of market dynamics. A more nuanced understanding of consumer behavior and prioritizing objective, verifiable information can provide a more accurate understanding of market dynamics. This balanced approach would ensure a more precise assessment of market power in merger cases, contributing to effective competition law enforcement.

Despite some areas of debate and uncertainty, the Commission’s analysis provides a detailed and nuanced understanding of the competitive landscape in the cheese and butter markets. This serves as a solid foundation for assessing the potential impacts of market concentration and for making informed decisions to ensure fair competition and protect consumer interests.

[1] Fiora Southey, ‘Emmi sells Italian cheesemaker Ambrosi to Lactalis: “Italian cheese classics are no longer part of our core range”‘ (Food Navigator, 26 July 2022) <https://www.foodnavigator.com/Article/2022/07/26/emmi-sells-italian-cheesemaker-ambrosi-to-lactalis-italian-cheese-classics-are-no-longer-part-of-our-core-range> accessed 29 October 2023

[2] Le Figaro, ‘Le géant laitier Lactalis acquiert le fabricant italien Ambrosi’ (Le Figaro, 1 June 2023) <https://www.lefigaro.fr/societes/le-geant-laitier-lactalis-acquiert-le-fabricant-italien-ambrosi-20230601> accessed 29 October 2023

[3] Ibid.

[4] See, for instance, Statista, ‘Cheese industry in Italy – statistics & facts’ (Statista, 13 July 2022) <https://www.statista.com/topics/6721/cheese-industry-in-italy/#topicOverview> accessed 29 October 2023

[5]  Prior notification of a concentration (Case M.10876 – BSA (LACTALIS) / AMBROSI) (Text with EEA relevance) 2023/C 145/16, §1

[6]  Ibid. §3

[7]  Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) (Text with EEA relevance), Article 2(3) ; For further information, see Moritz Lorenz, An Introduction to EU Competition Law (Cambridge University Press 2013) p21 and p242-308

[8] European Commission, ‘Daily News 01 / 06 / 2023’ (Europa, 1 June 2023) <https://ec.europa.eu/commission/presscorner/detail/en/MEX_23_3025> accessed 29 October 2023

[9] Commission Notice on the definition of relevant market for the purposes of Community competition law (97/C 372/03) §2-4

[10] Ibid.

[11] Ibid.

[12]  Case M.10876 BSA (Lactalis) / Ambrosi, §23-§24

[13]  Ibid. §24

[14]  See, for instance, Case M.4135 Lactalis / Galbani, §9 and Case M.5046 Friesland Foods / Campina, §500-504

[15]  Case M.10876 BSA (Lactalis) / Ambrosi, §25

[16] Ibid. §26-27

[17] Case M.4135 Lactalis / Galbani, §13

[18] Case M.7573 DMK / Doc Kaas, §58

[19] Case M.4135 Lactalis / Galbani, §14-15

[20] Case M.9413 Lactalis/Nuova Castelli, §96

[21] Case M.10876 BSA (Lactalis) / Ambrosi, §27

[22] Ibid. §37 and Case M.4135 Lactalis / Galbani, §9

[23] Case M.9413 Lactalis / Nuova Castelli, §75

[24] Case M.10876 BSA (Lactalis) / Ambrosi, §41

[25] Ibid. §40

[26] Ibid. §41

[27] Ibid. §43

[28] Ibid. §46

[29] Ibid. §48

[30] Ibid. §49

[31] Ibid. §50

[32] Ibid.

[33] Ibid. §51

[34] Ibid. §52

[35] Ibid. §53

[36] Ibid. §55

[37] Case M.4135 Lactalis / Galbani, §9

[38] Case M.9413 Lactalis/Nuova Castelli, §43-57

[39] Ibid. §59-64

[40] Case M.4135 Lactalis / Galbani, §13

[41] Case M.10876 BSA (Lactalis) / Ambrosi, §64

[42] Ibid. §65

[43] Ibid.

[44] Ibid.

[45] Ibid. §70

[46] Ibid. §82

[47] Ibid. §82

[48] Ibid. §72-78

[49] Ibid. §72-73

[50] Ibid. §73-75

[51] Ibid. §73

[52] Ibid. §74

[53] Ibid. §75

[54] Ibid. §75-76

[55] Ibid. §78

[56] Ibid. §79-81

[57] Ibid. §79

[58] Ibid. §80-81

[59] Ibid. §81

[60] Case M.4135 Lactalis / Galbani, §9

[61] Case M.10876 BSA (Lactalis) / Ambrosi, §84

[62] Case M.9413 Lactalis / Nuova Castelli, §65-70

[63] Case M.10876 BSA (Lactalis) / Ambrosi, §84

[64] Ibid. §92

[65] Ibid. §93

[66] Ibid. §94

[67] Ibid.

[68] Ibid. §95

[69] Ibid.

[70] Ibid. §98

[71] Ibid. §99

[72] Ibid. §99-100

[73] Ibid. §103

[74] Ibid.

[75] Ibid.

[76] Ibid. §104

[77] Ibid. §105

[78] Ibid. §107

[79] Ibid. §108

[80] Ibid. §109

[81] Ibid. §110

[82] Ibid. §111

[83] Ibid. §112

[84] Case M.4135 Lactalis / Galbani, §9

[85] Case M.10876 BSA (Lactalis) / Ambrosi, §120

[86] Ibid. §123

[87] Ibid.

[88] Ibid. §124

[89] Ibid. §125

[90] Ibid. §126

[91] Ibid. §127

[92] Ibid. §128

[93] Ibid. §129

[94] Ibid. §130

[95] Case M.5046 Friesland Foods / Campina, §500-504

[96] Case M.10876 BSA (Lactalis) / Ambrosi, §131

[97] Ibid. §132

[98] Ibid. §139

[99] Ibid. §141-143

[100] Ibid.

[101] Ibid. §142

[102] Ibid. §143

[103] Ibid. §144

[104] Ibid. §145

[105] Ibid. §146

[106] Ibid. §147

[107] Ibid. §148

[108] Ibid. §149-157

[109] Ibid.

[110] Case M.6722 Frieslandcampina / Zijerveld & Veldhuyzen And Den Hollander, §109-112

[111] Case M.6119 Arla / Hans, §30

[112] Case M.6722 Frieslandcampina / Zijerveld & Veldhuyzen And Den Hollander, §109

[113] Case M.10876 BSA (Lactalis) / Ambrosi, §155

[114] Ibid. §155-156

[115] Ibid. §157

[116] Ibid. §157

[117] Ibid. §162

[118] Case M.4135 Lactalis/Galbani, §18 & Case M.9413 Lactalis / Nuova Castelli, §120

[119] Case M.10876 BSA (Lactalis) / Ambrosi, §167

[120] Case M.9413 Lactalis / Nuova Castelli, §128.

[121] Case M.6627 Arla Foods/Milch-Union Hocheifel, §88

[122] Case M.10876 BSA (Lactalis) / Ambrosi, §24

[123] Case M.10876 BSA (Lactalis) / Ambrosi, §55

[124] Case M.4135 Lactalis / Galbani, §9

[125] Case M.4135 Lactalis / Galbani, §9-10

[126] Ibid. §10

[127] Ibid.

[128] Ibid. §9

[129] Ibid.

[130] Case COMP/M.4761 Bongrain/Sodiaal/JV, §21

[131] Case COMP/M.5046 Friesland Foods/Campina

[132] Ibid. §481

[133] Ibid. §484 and §501

[134] Ibid. §501-560

[135] Ibid.

[136] RC Chandan, CHEESE | Cheese in the Marketplace. in CA Batt and and ML Tortorello (eds), Encyclopedia of Food Microbiology (2nd edition 2014) p384-394

[137] Castello cheese, ‘Manchego Cheese’ (Castello Cheese, c2022) <https://www.castellocheese.com/en/cheese-types/semi-hard-cheese/manchego-cheese/> accessed 31 October 2023

[138] Walter Bisig and David W Everet, Cheese and Varieties Part II: Cheese Styles (International Dairy Federation 2021)

[139] Ibid.

[140] Ibid.

[141] Ibid. §142

[142] Ibid. §143

[143] Thomas Giebe and Miyu Lee, ‘Competitors in merger control: Shall they be merely heard or also listened to?’ [2020] 49(1) European Journal of Law and Economics <doi.org/10.1007/s10657-020-09649-3> accessed 31 October 2023

[144] Ibid.

[145] Ibid.

[146] Ibid.