K/Mars

The Kellanova/Mars Deal

As the European Commission resumes its investigation of the Kellanova/Mars deal, the deal seems headed toward either unconditional clearance or structural remedies, CTFN has learned.

The EC announced today, September 17, that its stop-the-clock ended on September 15. The new deadline for its Phase II decision is December 19. 

CTFN understands the merging parties did not discuss remedies with the EC during the stop-the-clock. The process is at a sensitive point, according to a source familiar with the matter, and it is not obvious what the remedies will be or if remedies will be needed.

But early feedback from conversations with relevant stakeholders suggests behavioral remedies are unlikely to resolve the deal’s competition issues, CTFN understands.

The EC appears reluctant to give serious consideration to a behavioral fix, at least in this matter, and European retailers are not seen as supporting behavioral remedies.

One possibility floated during the summer was that Mars and Kellanova could unbundle their food products in negotiations with retailers. But supermarkets and other retailers prefer the products to be bundled in pricing and supply negotiations, CTFN also understands.

European regulators continue to say that in the right circumstances they will accept behavioral remedies, but the EC has a “lot of anxiety based on past experience”, said Bill Kovacic, a former US Federal Trade Commission chair who now heads the competition-law center at George Washington University law school.

Several factors make the Kellanova/Mars review in Europe more complicated than many other deals. For example, a number of national competition agencies have a significant interest in the review process and will have an opportunity to provide input to the EC.

Andreas Mundt, president of the German Competition Authority, told CTFN that German regulators are receiving information about the deal review “from time to time” and will discuss the transaction with EC officials toward the “very end” of the EC’s review.

As CTFN previously reported, German retailers have expressed concern to the EC about the deal.

According to Mundt, national competition agencies can have an effect on the EC’s review. For example, these agencies can ask the EC to pose additional questions or examine certain matters more closely, he said.

Kovacic noted European courts' recognition of portfolio effects as a viable theory. Although it remains disputed, it is getting a revival in its use against tech platforms, he said.