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Merge

Nestle’s $10.1 billion merger with Ralston Purina occurred in the year 2001. Pet food industry is growing fast, so this combining of efforts was considered positive and beneficial for both companies (Ackman). Nestle is a huge company with a wide range of products that operates in many countries (History). Therefore, that merge was positive for Purina as it could spread its activity under a well-known brand.

However, there are some reasons to oppose that merge. For instance, many representatives from the American Antitrust Institute, the Consumer Federation of America, the Consumer Alliance, the National Consumers League, the Organization for Competitive Markets and the National Grange united against it. Swiss-based Nestle bought the world's biggest pet food company and started to control nearly 45 percent of the U.S. pet food market. To the opinion of Nestle opponents, the dominance of Nestle will be harmful to national U.S. food producers.

Albert A. Foer, the president of the American Antitrust Institute, an independent, Washington-based nonprofit group, said that Purina would be likely to harm smaller competitive brands at the U.S. market and collude with food giants to raise prices. Arthur S. Jaeger, the assistant director of the Consumer Federation of America (CFA), stated that Purina would harm American consumers, because it is a part of the Swiss-based company, not American. Michael C. Stumo, the general counsel of the Organization for Competitive Markets (OCM), warned that American food industry became too concentrated and monopolized.

American farmers, ranchers and rural communities are struggling for market and profits, but it is difficult to survive in competition with food giants like Nestle. Markets are becoming less transparent and open as well as they may become monopsony. Such market situation is considered as bad as the monopoly. Nestle is likely to benefit from it by lowering purchasing prices for farmers (Diverse Groups Unite to Oppose Nestle’s Merger with Ralston Purina).

The other important reason to oppose Purina’s and Nestle’s merge is Nestle’s criticism and reputation. The products of Nestle are often boycotted. For example, Nestle was blamed for using child slave labor on farms in Ivory Coast (Chatterjee). Nestle was also blamed for human rights violations in Colombia (Bussey). There were many other scandals connected with Nestle. Of course, Purina might not be directly involved in them. Nevertheless, it became a part of Nestle. Therefore, the boycotts and criticism of Nestle products will be targeted on Purina’s products, too. Purina is likely to suffer and lose profits and reputation because of overall Nestle scandals.

The merge of Nestle and Purina was considered by many experts as successful for both companies. However, there are some issues against it. The first problem regards Purina itself. Of course, Purina benefited from the merge due to selling its products with the well-known Nestle brand. However, Nestle’s problems and scandals may badly influence Purina, too. If the products of Nestle are boycotted, Purina will suffer from it, because it is a part of Nestle.

However, there is one more important issue. After the merge, Nestle became more powerful. It is a chance that it monopolizes some of the U.S. food market branches. Furthermore, Nestle is not an American company. Moreover, Nestle is likely to state monopsony by lowering purchasing prices for farmers. Farmers and small companies may go bankrupt providing that they will be not able to compete with the giant Nestle. To my opinion, this issue is more weighty than the first one, because it regards all U.S. food market and may be harmful to American economy.

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