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Commerce Commission rules out price control inquiry for milk

Commerce Commission rules out price control inquiry for milk

August 2 (BusinessDesk) – New Zealand’s antitrust regulator has ruled out price controls for the nation’s domestic milk, saying enough rivalry exists between the two main supermarket chains while for wholesale milk, Fonterra and Goodman Fielder compete for supplies.

“Overall our analysis shows that the level of competition, taking into account existing regulation arrangements means that intervention under Part 4 of the Commerce Act is not possible,” said Mark Berry, chairman of the Commerce Commission.

The regulator reviewed four levels of the domestic market – farm gate supply, factory gate supply, wholesale and retail. It found that at the farm gate it didn’t have the power to intervene under the Commerce Act even though Fonterra dominates purchasing.

Part 4 of the Commerce Act is not designed to regulate the acquisition of goods and services in markets where the acquirer has a high degree of market power, Berry said.

At the factory gate, the regulator concluded there was “little or no competition in the market” and little prospect of an increase in competition. However, factory gate supply was already regulated under the Dairy Industry Restructuring Act and the Raw Milk Regulations, which were designed to constrain Fonterra’s market power.

An interdepartmental government review is currently reviewing the regulations.
“In both the wholesale and retail markets there is more competition than little or no competition (the threshold),” Berry said.

“Part 4 regulation is only imposed on firms with a high degree of market power, usually because of the natural monopoly characteristics of the industry in question, such as electricity or gas distribution,” he said.


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