New Zealand’s Commerce Commission could end up regulating the $11bn dairy industry and dairy giant Fonterra if investigations into milk prices throws up any flaws, according to reports.
A Ministry of Agriculture (MAF) briefing paper to Parliament’s commerce select committee, has said that a group comprising MAF, Ministry of Economic Development and Treasury officials had been established to look into how Fonterra sets the price it pays farmers for their milk. This price becomes the benchmark for New Zealand dairy markets.
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However, if the investigation concludes that the method is flawed, then changes will need to be made, Business Daily wrote today (24 June). Fonterra currently collects around 90% of the country’s milk, setting prices using a largely confidential methodology.
“The Commerce Commission is really the outfit best-placed and most likely to re-regulate the price of raw milk,” a competition law specialist told the publication. “It could do that by effectively collapsing DIRA and there is some prospect another regime could pop up and become a regulated industry under Part 4 of the Commerce Act.”
Another option is to bring Fonterra under “sunshine regulation”, which requires entities with quasi-monopoly market positions to disclose their pricing calculations and mechanisms.
Fonterra director and milk panel member John Wilson told Business Daily that the company proposed to make the manual “a lot more transparent than it is today” but could not promise full disclosure. He declined to comment on the increased government scrutiny of Fonterra’s methodology.
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