March 31, 2011
Fonterra accused of playing milk price games
Fonterra is being accused of milk price games as it artificially increases the price of milk in New Zealand in a deliberate attempt to reduce competition, according to an official complaint to the Commerce Commission.
The allegation, formally laid with the competition watchdog late last week, is understood to have triggered the commission's announcement it is starting an investigation to determine whether a price control inquiry into retail milk is needed.
This comes less than a week after ruling out such an inquiry before a parliamentary commerce select committee.
The complaint, laid by a party that will not be identified for commercial reasons, said Fonterra, which controls around 90% of the country's milk production, has in the past two years moved to a notional instead of an actual milk price.
The complainant has asked the commission to determine the legality of the practice of notional price setting.
The complaint brings to a head a swag of informal public calls to the commission in the past three months for an inquiry into the rising price of fresh milk and a campaign by consumer watchdog, Consumer New Zealand, for an official inquiry into how the retail price of milk is set.
Fonterra's market dominance has also been under attack in public and dairy industry submissions to the government about the dairy giant's plan to introduce share trading among its farmers.
The proposal requires government support for a change to legislation intended to rein in Fonterra's market power, the Dairy Industry Restructuring Act 2001.
Critics said the plan is anti-competitive because it will result in an increase in Fonterra's market power, particularly over farmer-suppliers.
Fonterra is farmer-owned and New Zealand's biggest company. It is also the world's biggest dairy exporter.
It supplies at least 90% of the wholesale milk supply to New Zealand retail manufacturers, including its biggest competitor in the retail market, food giant Goodman Fielder.
