Aussie calls to form Fonterra-style dairy giant 'not soundly based'

By Mark ASTLEY contact

- Last updated on GMT

Related tags: New zealand dairy, New zealand

Calls for Australia to "emulate" the formation of New Zealand dairy cooperative Fonterra by relaxing competition laws are "not soundly based," a panel charged with reviewing the legislation has claimed.

The draft Competition Policy Review report, published yesterday, addressed suggestions that amendments be made to Australian competition law to allow the creation of a "national champions" ​- national firms large enough to compete globally - like Fonterra.

Fonterra, the world's largest dairy exporter, was formed in 2001 by the merger of the New Zealand Dairy Board with New Zealand Dairy Group and Kiwi Cooperative Dairies.

This merger was, however, not permitted under New Zealand competition law but through special legislation. 

Fonterra is owned by around 10,500 New Zealand dairy farmers - approximately 95% of the country's milk producers.

The Competition Policy Review Panel, headed up by Australian economist Dr Ian Palmer, accepted that "the pursuit of scale efficiencies is a desirable economic objective."

It is, however, "less clear whether, and in what circumstance, suspending competition laws to allow the creation of national champions is desirable from either an economic or consumer perspective," ​it said.

“Some commentary has suggested that Australia should seek to emulate the formation of Fonterra and our competition policy and laws should be amended to facilitate this outcome,”​ said the draft report.

“The Panel considers that important difference between the circumstances surrounding Fonterra’s formation and those applying in Australia mean that this conclusion is not soundly based."

The draft report​ is now open for public consultation until November 17. The Competition Policy Review Panel will then consider its final recommendations before issuing its final report by March 2015.

Related topics: Markets, Emerging Markets

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