The proposed purchase of the Galtee Meats beef plant in Charleville, Co Cork, by Dawn Meats will be the first deal to be subject to a full Competition Authority investigation under new mergers legislation, writes Cliff Taylor, Economics Editor

The authority announced yesterday that it would decide by January 9th whether the acquisition could proceed, in a move seen as part of a strong focus it is putting on the beef sector.

Last month Dairygold announced that it was selling the Charleville plant to Dawn Meats for an undisclosed sum, as part of its strategy to exit a sector in which it was losing money. The plant, where around 150 people work, is primarily a slaughtering facility and was sold as a going concern to Dawn, the privately-owned processor that is part of the Queally Group. In a related disposal, Dairygold also sold a boning plant in Kilbeggan, Co Westmeath, to Dungannon Meats, a Northern company.

The Competition Authority announced yesterday that during a one-month initial investigation it was unable to determine whether the proposed purchase would substantially weaken competition in the Irish market. For this reason, it would undertake a full investigation under Section 22 of the Competition Act 2002, the first time it has done this since the new legislation came into force at the start of this year.

The authority would make no further comment, but it is inviting interested parties to make submissions to it by October 30th. A Dairygold spokesman said it was part of the normal regulatory process.

Dawn Meats has a share of around 20 per cent of the beef market. The Charleville plant that it is seeking to purchase slaughters up to 60,000 cattle a year, representing less than 4 per cent of the total national kill of some 1.65 million.

The authority is likely to investigate whether the purchase would damage competition in the beef trade in the south-west region. Dawn already has a plant in Midleton in east Co Cork. However, the other big processor, the Goodman Group, has a nearby plant in Rathkeale, Co Limerick, as well as one in Bandon, Co Cork. Another sizeable processor, Kepak, is also represented in the region with a plant in Watergrasshill, Co Cork.

The Competition Authority move will be seen as part of a general strategy it is adopting towards the beef sector, which has seen it move against a major rationalisation programme. A group of all the main beef processors, the Beef Industry Development Society (BIDS), put forward a plan to rationalise the sector from 40 plants to 30, in an attempt to increase capacity and protect profit margins.

The plan was supported by Enterprise Ireland, the State agency with responsibility for indigenous industry. The proposed change of ownership of the Charleville plant was not, however, part of this plan, but is a further signal of rationalisation in a sector where profit margins have come under heavy pressure.

During the summer, the authority initiated High Court proceedings against BIDS, on the grounds that it believed the rationalisation would reduce competition in the Irish market. Following this, BIDS gave the authority an undertaking that it would not proceed with the scheme unless it was backed by the High Court. BIDS has still to decide whether to try to progress the plan and respond in court to the Competition Authority's proceedings. There is no sign of a negotiated solution between BIDS and the authority to date.