The merger of egg suppliers Stonegate and Deans Foods looks set to be reversed after competition watchdogs reiterated their commitment to a breakup.
The Competition Commission inquiry, chaired by Dame Barbara Mills, has brushed aside a proposal from the merged company, Noble Foods, to put some of its egg producers on a 'portable contract' to allow it to switch volumes into other packers at short notice.
Far from satisfying concerns, the proposal was slammed as lacking in transparency and onerous for producers. The Commission also reported concerns from some producers that Noble could target them if they tried to switch to another packer. There were fears Noble could block transfers by raising prices for farmers looking to switch.
"The remedy proposed does not include Deans' production," said the Commission in its remedies working paper. "Even if it did so, it would still be ineffective in addressing the significant lessening of competition because it would not recreate a large second competitor. The bureaucracy of the process would make it impractical. We also note the likely ability of the parties to frustrate the transfer of producers."
The document makes it clear the Commission would only accept a proposal that returned the market to its pre-merger state. It favours the divestment of Stonegate - the smaller partner in the merger - as the cheapest and easiest solution.
"It's not the final decision, but it would be disingenuous of me to claim this document wasn't a strong pointer," said a spokesman.
He denied claims the decision relied too heavily on testimony from the multiples, which are largely against the merger. "We aren't too strongly swayed by anyone - we're used to weighing up objective submissions and arriving at our own decision."
A ruling is expected next week.