Fonterra's impact on New Zealand dairy industry competition to be investigated
Minister for Primary Industries, Nathan Guy, and Minister for Commerce and Consumer Affairs, Paul Goldsmith, said today they will request a report from the Commerce Competition on the state of competition in the country's dairy sector.
"The dairy industry is a major part of our economy, and we've seen significant growth in recent years," said Guy.
"This report into the state of competition is key to assessing whether the Act is effectively promoting efficient operation of dairy markets in New Zealand," he added.
Under Section 148 of the Dairy Industry Restructuring Act (DIRA) - legislation that allowed the merger of New Zealand Cooperative Dairy and Kiwi Cooperative Dairies to form Fonterra in 2001 - the Ministry for Primary Industries (MPI) was required to request a Commerce Commission report by June 1 2015, when the 2014/15 milk production season ends.
DIRA was "designed and implemented to mitigate the risks of Fonterra's market power."
Under DIRA, at least 20% of milk solids on or from dairy farms on the North Island and South Island of New Zealand must be collected directly or indirectly by independent processors.
Market share "reset"
Having "built up a good deal of industry expertise through its milk price monitoring functions" the Commerce Commission is "well placed to undertake" the report, said Goldsmith.
The Commerce Commission plans to launch a consultation by June 10.
It hopes to present its final report on the state of competition in the New Zealand dairy sector to the MPI by February 26 2016.
"The report will provide the Minister with an independent view on the state of competition in the New Zealand dairy industry," a statement on the Commerce Commission website reads.
If the Commerce Commission concludes the state of competition in the New Zealand dairy industry is "insufficient" it will make recommendations on whether the market share thresholds detailed in Section 147 of DIRA "should be reset."