Independent Dairy Producers (IDP), the company behind Auckland's Premium Milk brand, is to take dairy giant Fonterra to the Commerce Commission over allegations that Fonterra has been charging too high a price for raw milk.

The Commerce Commission has said it will investigate IDP's application.

The Dairy Industry Restructuring Act, which was set up by the New Zealand government, allows Fonterra to control 95% of the country's milk supply, while ensuring that smaller competitors are treated fairly. The act requires Fonterra to supply up to 400m litres of raw milk at a fair price to New Zealand customers.

The Commerce Commission explained that IDP and Fonterra were in a dispute about interpretation and application of the act.

Fonterra has not been challenged by the Commerce Commission before. Fonterra was originally exempted by the government from being scrutinised by the commission.

IDP alleges that Fonterra subsidiary NZMP had not complied with the act by refusing to sell raw milk to IDP at the default milk price between November 2001 and August 2002.

Fonterra denies any unfair treatment of IDP, reported the New Zealand Press Association.