Fonterra Welcomes Overturned Decision

For Immediate Release 30 June 2003

FONTERRA WELCOMES OVERTURNED DECISION

Fonterra Co-operative Group Ltd tonight welcomed the Commerce Commission's overturning of its earlier draft determination on the Independent Dairy Producers complaint, but remains deeply concerned by the implications of the final determination.

"The Commission's draft determination, issued in January, suggested that Fonterra was in breach of the Dairy Industry Restructuring Act Raw Milk Regulations for three of the nine months under dispute, from December 2001 to March 2002," Fonterra's General Counsel, David Matthews, said.

"Today's final determination, reached after public hearings, overturns that finding.

"Instead, the Commission has now determined a breach of the Regulations occurred for the last two months at the end of the period, from 1 June to 31 July 2002, and for completely different reasons. Previously the Commission had not raised any issue with those months.

"We welcome the fact that the Commission now agrees that Fonterra abided correctly by the Regulations for some 80 per cent of the period in dispute, and the Commission's acceptance of its initial error of interpretation in the draft determination.

"However, we remain deeply concerned that the Commission's interpretation of the Regulations implies that Fonterra should close down rather than continue to supply a weak competitor," said Mr Matthews.

"The implication is that Fonterra should rather have refused to supply IDP, which was a defaulting creditor for most of the period in question.

"We are still studying the Commission's determination, but it would appear that IDP would have had no grounds for a complaint under the Regulations if Fonterra had refused to supply raw milk rather than agree a price reflecting the commercial risk to Fonterra of continuing to supply IDP.

While the impact of the determination is small - estimated to be around $60,000 - the principle involved is important and Fonterra will examine its options once it has had time to study the determination in detail.

Mr Matthews also expressed Fonterra's ongoing concern at numerous aspects of the process adopted by the Commerce Commission for this investigation.

ENDS

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