Fonterra competitors oppose deregulation

  • 14/07/2015
Fonterra competitors oppose deregulation

By Fiona Rotherham

Competitors of Fonterra Cooperative Group, the country's largest dairy processor, claim there is still insufficient competition to deregulate the industry.

In submissions to the Commerce Commission, which is undertaking a government-ordered review of the industry's competitiveness, rival processors either want the status quo or the regulations tightened.

Farmers lobby group, Federated Farmers, says the Dairy Industry Restructuring Act 2001 (DIRA) will need to be amended if it's retained long-term.

Fonterra's submission generally supports the process and methodology suggested in the commission's consultation paper and says it will comment separately on substantive issues raised by the review.

The cooperative said the commission should consider the full period since the DIRA came into effect rather than the most recent five years, and that it was particularly important to examine the entire "life cycle" of entry and growth of independent processors.

Among the issues under investigation is whether the DIRA competition thresholds have been met.

The current threshold frees Fonterra from its obligation to supply milk to smaller competitors once at least 20 percent of supply is taken by competitors in both the North and South Islands.

Fonterra has an 86 percent share of the nation's milk pool, down from 96 percent when it was set up in 2001.

In its submission, Westland Milk Products said it had successfully attracted milk supply from dairy farm conversions but had been less successful in wooing existing Fonterra suppliers to switch.

Only a quarter of its Canterbury shareholders are ex-Fonterra and it said Fonterra's actions to secure supply are contrary to the purpose and principles of the Act.

"We are concerned that actions employed by Fonterra in response to competition for milk supply at the farm gate demonstrate that Fonterra has used, and has the potential to continue to use, its position of dominance to restrict competition and, thus, there remains the need for regulation of Fonterra in order to sustain competition in this area," it said.