Commission clears proposed acquisition of Cadbury by Kraft Foods, subject to conditions

The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Cadbury PLC of the UK by Kraft Foods Inc. of the US by way of public offer. The decision is conditional upon the divestment of the Polish and Romanian chocolate confectionary businesses of Cadbury. In view of the remedies proposed, the Commission has concluded that the operation would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Competition Commissioner Neelie Kroes said “In view of the remedies offered, I am satisfied that the proposed takeover would not adversely affect competition anywhere in Europe and that consumers would not be worse off”.

Kraft is a worldwide food and beverage company active in more than 150 countries. Cadbury is a worldwide producer and seller of chocolate and sugar confectionery products in over 60 countries.

Both Kraft and Cadbury are strong players in the chocolate confectionary business in the EEA. With its main chocolate brands Milka, Côte d'Or and Toblerone, Kraft has a very strong presence in most Member States, with the exception of the UK and Ireland where customers' preferences remain strong for traditional British chocolate. Cadbury is the market leader in the UK and Ireland, in particular with its brand Dairy Milk, while in continental Europe it is mainly active in France, Poland, Romania and Portugal, through local brands which it previously acquired.

While the market share of Cadbury is very significant in the UK and Ireland, the penetration of Kraft's brands in these markets remains low. In addition, Kraft's and Cadbury's brands do not compete closely with each other, given the strong preference of UK and Irish customers for traditional British chocolate as opposed to “continental types” of chocolate. Therefore, the Commission found no competition concerns in the UK and Irish markets.

However, the Commission identified competition concerns within chocolate confectionery in Poland and Romania, where the combined market share of Kraft/Cadbury is particularly high and their brands are competing closely, in particular in the chocolate tablets markets.

To remedy these concerns, Kraft committed to divest Cadbury's Polish confectionery business marketed under the Wedel brand and Cadbury's domestic chocolate confectionery business in Romania.

After market testing the proposed commitments, the Commission concluded that they would remove the competition concerns identified. The Commission therefore concluded that the proposed transaction, as modified by the commitments, would not raise competition concerns.