A break-up of the organisation into a number of independent and competing businesses, each with its own milk quota, is the key recommendation in a damning MMC report cataloguing the way Milk Marque abuses its dominant position, forcing consumers to pay more for fresh milk than they should.
However, Mr Byers decided that such a restructuring of Milk Marque would be "a drastic step", affecting a large proportion of the farmers in England and Wales. "I am also conscious that this remedy would take a considerable time to put fully into effect, perhaps as long as two years. This itself would introduce worrying uncertainties for the industry", he added.
Mr Byers' decision to ignore the MMC's recommendation contrasts starkly with his declared intention of giving the UK's competition authorities independence and removing political interference from monopoly and merger decisions.
In place of an enforced break-up, Mr Byers has ordered an overhaul of the system for selling milk and has effectively blocked Milk Marque from expanding into processing of dairy products, such as cheese and yogurt. Milk Marque will not be allowed to buy or build any processing plant without prior agreement of the Director General of Fair Trading, John Bridgeman.
The 592-page MMC report, one of the longest ever, found that Milk Marque had exploited its dominant position by using its selling system to price discriminate and control the supply of milk to the market.
Among a long list of anti-competitive practices uncovered by the MMC during its year-long inquiry, Milk Marque negotiated contract terms with large processors in secret and forced up prices by limiting the amount of milk offered to its customers even though demand remained unchanged. It also forced smaller processors to pay more for their milk than bigger ones, and widened price differentials between different contracts by more than was justified.
The Dairy Industry Federation, which represents processors such as Unigate, Express Dairies and Dairy Crest, welcomed the report. The federation's director general Jim Begg said it would hold talks with Milk Marque and the OFT to help shape the industry in a way that would invoke security for milk producers and processors. "We believe our dairy industry can now look forward to a brighter future," he added.
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