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NZPA/Ross Setford
Fonterra told to deliver smaller rivals with milk
The Commerce Commission has confirmed that Kaimai Cheese Company Ltd and the Grate Kiwi Cheese Company Ltd are legitimate "independent processors" -- a status that effectively forces Fonterra farmers to supply them with cheap milk.
Now Fonterra not only has to deliver the milk where its smaller rivals want it, but those companies can each claim up to 50 million litres a year of the low-cost milkflows, even though they may be linked to the same manufacturer.
The commission today released a final determination that potentially opens up Fonterra to a proliferation of small food processors each seeking a share of the 600 million litres of "statutory" milk it has to provide at cost price.
"Kaimai and Grate Kiwi are `independent processors' ... and are entitled to be supplied with milk by Fonterra," the commission said in a 46-page decision.
It said the Dairy Industry Restructuring (Raw Milk) Regulations 2001 allows independent processors to require milk to be delivered to a nominated delivery address -- which could be the same factory for a series of small companies.
"An interpretation of the term `independent processor' in the regulations that allows an independent processor the freedom to contract a third party to perform some or all of the production process for milk, milksolids or dairy products best gives ... efficient operation of dairy markets," said Deborah Battell, the commission's director of competition.
Fonterra lost on all fronts in the case, in which the commission said: "Fonterra has breached the regulations by not supplying Kaimai and Grate Kiwi with milk under the regulations since October 1, 2008.
"The commission has ordered Fonterra to pay compensation to Kaimai and Grate Kiwi for the loss associated with the fact that they did not receive milk".
