Scoop has an Ethical Paywall
Work smarter with a Pro licence Learn More

Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Open Country challenges validity of Fonterra 2018 milk price

By Paul McBeth

Feb. 18 (BusinessDesk) - Open Country Dairy is seeking a judicial review of the way Fonterra Cooperative Group set its milk price in the 2018 season, despite the Commerce Commission giving the price-setting process a pass mark.

The commission noted the judicial review on its website, saying Open Country Dairy brought proceedings against certain conclusions in its 2018 report.

In that report, the regulator was satisfied that Fonterra's calculation was largely in line with the efficiency and contestability elements required by law governing the dairy sector. However, it was also of the view that Fonterra's asset beta - used in calculating the cost of capital for a milk processor - was too low, meaning the dairy giant ended up paying its farmers a higher price for their milk than warranted under the law.

Open Country's submissions on the report were that the beta was too low and that Fonterra's sales outside the Global Dairy Trade platform were too opaque.

The country's second-biggest milk processor also told the commission that independent processors were limited to investing in areas where they can earn a viable return, and that Fonterra's dominance meant that there wasn't a contestable market.

The regulator disagreed with that submission in the report, saying it didn't consider that Fonterra can use its market position to lower farmgate prices below competitive levels or restrict independent processors from accessing raw milk.

Those questions are among those up for review, with the Ministry for Primary Industries analysing 188 submissions on proposals to change the Dairy Industry Restructuring Act, which enabled the formation of Fonterra.

Advertisement - scroll to continue reading

Are you getting our free newsletter?

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.

In its submission, Fonterra noted Open Country's and Synlait Milk's concerns over the way the base milk price is set. Fonterra said the status quo is working and is transparent.

Fonterra acknowledged Open Country's judicial review in its submission, saying the claims were on issues the smaller processor had already raised during the review.

"We consider that OCD's claims have little merit and are joining the proceedings to defend the decisions of the commission that are being challenged," Fonterra said in its submission. "OCD’s ability to do this is another element of the checks and transparency in the regime."


© Scoop Media

Advertisement - scroll to continue reading
 
 
 
Business Headlines | Sci-Tech Headlines

 
GenPro: General Practices Begin Issuing Clause 14 Notices

GenPro has been copied into a rising number of Clause 14 notices issued since the NZNO lodged its Primary Practice Pay Equity Claim against General Practice employers in December 2023.More

SPADA: Screen Industry Unites For Streaming Platform Regulation & Intellectual Property Protections

In an unprecedented international collaboration, representatives of screen producing organisations from around the world have released a joint statement.More

 
 
 
 
 
 
 
 
 
 
 
 

Join Our Free Newsletter

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.