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The competition watchdog says it will closely monitor the pork industry after approving the takeover of Australia’s biggest producer, Rivalea, by Brazilian beef behemoth JBS.
JBS, which is controlled by powerful Brazilian business brothers Wesley and Joesley Batista, is buying Rivalea as part of a $700m spending spree in Australia that also includes taking over Tasmanian salmon farmer Huon.
The Australian Competition and Consumer Commission investigated concerns that JBS might stop allowing other pork producers to kill pigs at Rivalea’s Diamond Valley abattoir in Melbourne.
It also investigated whether allowing the takeover could mean Rivalea cut off the supply of fresh pork to companies that compete with Australia’s biggest smallgoods manufacturer, Primo, which is owned by JBS.
ACCC deputy chair, Mick Keogh, said the pork industry was already very concentrated but allowing the takeover would not cause a substantial lessening of competition – the threshold required for the watchdog to knock back a merger.
He said JBS had no financial incentive to stop service kills at Diamond Valley, which slaughters about 17,000 pigs a day.
“The only way for that to remain profitable is to maintain that throughput or increase that throughput,” he told Guardian Australia.
He said that while he could “see a scenario where it would advantage Primo, for example, if other smallgoods manufacturers couldn’t get competitive product”, about 80% of the meat used for smallgoods such as ham and salami was imported from overseas.
Most of the imported meat comes from Denmark and the United States, where pig farmers are supported by generous agricultural subsidies.
“So even if JBS for example, stopped importing pork for Primo and moved to domestic pigs, other manufacturers could simply convert to imports and imports are typically substantially cheaper than domestic pigs for that purpose,” Keogh said.
Issues relating to whether the Batista brothers, who have been at the centre of a storm of bribery allegations in Brazil, fall outside the ACCC’s jurisdiction and were not investigated by it.
A US$362m loan that helped fund JBS’s entry into the Australian market in 2007 was part of a “sequence of reckless and/or fraudulent acts” that demonstrated “a fraudulent management of the public institution with the sole purpose of giving privileged treatment” to J&F Participações, the Brazilian company through which the Batistas control JBS, Brazilian prosecutors said in a criminal complaint against Joesley Batista. The allegations never went to trial.
In 2017, the brothers entered into a plea deal that saw them avoid prosecution in return for Joesley’s cooperation in the bribery investigation.
The Rivalea deal requires approval from the Foreign Investment Review Board to go ahead. Firb approved JBS’s takeover of Huon in October and Huon shareholders voted overwhelmingly in favour of the sale last month.
Chief executive of JBS Australia, Brent Eastwood, said the company would continue to provide service kills at Diamond Valley “and also grow the customer base”.
“We have provided this assurance directly to all DVP customers in writing, to local pork groups including the Victorian Farmers Federation and to the ACCC,” he said.
“JBS has a long and proud history of supporting and growing its Australian businesses – investing heavily in its local operations and domestic brands, while at the same time providing employment opportunities and supporting the regional economies in which we operate.
“We will employ this same locally minded approach at Rivalea.”