Government to study dairy merger proposal

The Government has welcomed a proposal by Kiwi Dairy and New Zealand Dairy Group companies to restructure the dairy industry, Agriculture Minister Jim Sutton said today.

The companies made public the "mega-merger" proposal this afternoon.

Mr Sutton said the dairy industry was a crucial one for New Zealand. Dairy exports were worth about 25 per cent of all export earnings.

"This proposal will be studied extremely carefully. It is a top priority for the Government."

However, Mr Sutton said there were some complex public policy issues and these could take some time to work through.

"The request from industry and the challenge to Government is to move from laws designed to stop a highly fragmented industry from falling apart, to laws that prevent a monolith from falling to the temptations of monopoly power."

He said that while the Government would give very high priority to the process in the new year, the industry's preferred timetable was very optimistic.

"Indeed, given the number and complexity of the public policy issues raised, it doesn't seem likely to be possible."

Mr Sutton said that, with an industry as important to the future of the New Zealand economy as dairy was, the Government needed to be sure that all issues had been carefully assessed.

This included aspects of competition law.

"This is clearly a major issue for Government in terms of making judgements as to the public interest. We're going to have to decide quite quickly whether that decision should be made by the Commerce Commission, which has been set up to make such decisions, or whether the deal is so unique in New Zealand's commercial history that it should be made by ministers."

ENDS

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