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Zespri Opposes Second T&G Kiwifruit Export Bid

15 June 2011

Government Faces Embarrassment as Zespri Opposes Second T&G Kiwifruit Export Bid

“This is a deeply flawed, anticompetitive system, which allows unethical monopolistic behaviours that would not be tolerated in any other industry or international market.” – Jeff Wesley Turners & Growers Managing Director, on New Zealand’s ‘collaborative marketing’ system for kiwifruit.

Senior Government Ministers defending Zespri’s monopoly over New Zealand’s kiwifruit exports face embarrassment after Zespri opposed a second bid by Turners & Growers to export new kiwifruit varieties under ‘collaborative marketing’ provisions, which the New Zealand Government has told the WTO allow for other New Zealand companies to export kiwifruit.

The high-profile failure of the kiwifruit regulations comes on the heels of the OECD calling for Government to remove Zespri’s monopoly over the country’s kiwifruit exports, saying it was a barrier to trade and investment.

Turners & Growers’ application to export its ENZAGold, ENZARed and Summerkiwi varieties through a collaborative marketing agreement with Zespri was lodged with the industry regulator, Kiwifruit New Zealand (KNZ) late last year after repeated public calls by Zespri and the Government for Turners & Growers to “work through the system” and assurances by Zespri head, Lain Jager that “the collaborative marketing provisions provide the best and least-cost path forward for Turners and Growers and others to develop export opportunities.”

Zespri opposed Turners & Growers application and it has been turned down by Kiwifruit New Zealand.

The Turners & Growers application was a key test for the monopoly regime, with Zespri, KNZ and the Government claiming the decade old kiwifruit regulations could work for Zespri’s competitors who have developed their own innovative new varieties for export from New Zealand. In one of the most comprehensive and detailed applications presented to Zespri and KNZ since the regulations came into force in 1999, Turners & Growers sought approval to export its ENZAGold, ENZARed and Summerkiwi varieties to multiple countries on four renewable five-year terms.

Turners & Growers Managing Director, Jeff Wesley said, “We have done all we can to work within the monopoly controlled system, but the decision by KNZ to turn down our second application to export our new varieties proves that the system, which has only ever been marginal at best, is now completely outdated and does not work. The Government’s claim that the collaborative marketing system allows others from New Zealand to export has been shown to be a charade.”

Mr Wesley said Turners & Growers discussions with Zespri focused on the need for trust between the companies and a five year rolling term for any deal made, to allow for certainty for New Zealand growers investing in ENZA’s new varieties. However Zespri would not engage on anything more than a 1-year trial into limited markets and insisted on a gag clause in any agreement to limit Turners & Growers criticism of the monopoly. “Terms no business could accept as at any moment Zespri could pull the rug out from under ENZA growers,” said Wesley.

“We will have the first New Zealand grown red kiwifruit for export, while Zespri’s red cultivar is still only being trialled on orchards here. We want to get ENZA’s NZ-grown premium kiwifruit varieties into export markets as soon as possible to start earning premiums for Kiwi growers and a much needed boost for exports.”

He said the regulator’s decision to turn down Turners & Growers application leaves the Government trying to explain to its international trade partners why there is a significant gap between the theory of the Zespri’s monopoly control over New Zealand kiwifruit and how it works in practice.

“The process through KNZ has been unnecessarily lengthy and KNZ’s decision not to grant a CMA to Turners & Growers blocks ENZA from another season of exports.”

“This is a deeply flawed, anticompetitive system, which allows unethical monopolistic behaviours that would not be tolerated in any other industry or international market.”

Wesley said the process highlighted again the misleading nature of the Government’s notification to the WTO to protect Zespri’s monopoly. “Three of the five current members of KNZ own shares in Zespri.”

“It’s also misleading for the New Zealand Government to suggest that companies other than Zespri can export kiwifruit from New Zealand, when less than 2 per cent of kiwifruit is exported under CMA’s each year, and inexplicably, a quarter of those are granted to Zespri itself.”

The OECD’s call for Zespri’s anticompetitive monopoly to be lifted to boost trade and investment backs the finding of the Government’s own 2025 Taskforce, which also stated that Zespri’s ‘monopoly powers’ should be revoked, and rejected the Government’s claim that the monopoly should stay if a majority of growers back it saying: ”It is not clear what public policy interest would justify a Zespri monopoly that prevented, say, 35% of growers who wished to do so from selling their fruit abroad through other companies. The vines and fruit are private property.”

ENDS

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