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Commission Decision Goes Against Fonterra

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Sept 26 NZPA - Fonterra has lost out in a Commerce Commission draft decision today to do with the supply of milk to competitors Kaimai Cheese Co Ltd and Grate Kiwi Cheese Co Ltd.

To ensure competition when Fonterra was formed, it was required to supply "regulated" and relatively cheap milk to smaller processing companies.

Grate Kiwi and Kaimai argued that any person who carries out some processing of any kind of milk or dairy product should be able to demand 50 million litres of cheap milk -- and ask for it to be delivered to the factory of their choice.

Fonterra argued that Kaimai and Grate Kiwi are not processors of raw milk. If Kaimai and Grate Kiwi are supplied with raw milk at cost price it could mean any company which processes dairy foods of any kind can get cheap milk from Fonterra.

The case tested the definition of an independent processor.

"The commission's preliminary view is that Kaimai and Grate Kiwi Cheese are independent processors under the Dairy Industry Restructuring (Raw Milk) Regulations 2001," the commission said in a draft determination.

Submissions are being called on the draft prior to a final decision.

Grate Kiwi began grating and blending cheese for the New Zealand market in 1991 and says it intends over time to expand into processing raw milk into cheese.

Waharoa-based Kaimai is a newer company and intends to supply a range of soft, hard and semi-hard cheeses.

Fonterra argued the two companies are indirectly linked to Open Country Cheese, one of the first small companies with which it faced-off in front of the commission.

Former MP Wyatt Creech and the Dairy Investment Fund were co-founders of Open Country, and Mr Creech is a director of both Open Country and Kaimai. The fund has a 30 percent stake in Grate Kiwi, 27 percent of Kaimai and 20 percent of Open Country's controlling shareholder, Dairy Trust, which is controlled by Affco and a Singaporean global dairy trader Olam International.

Grate Kiwi was called Oceanic Foods when it began grating and blending cheese for the New Zealand food service market. It has since agreed with Fonterra's biggest domestic rival, Goodman Fielder, to start packing retail cheeses, and signed a deal for Open Country to make cheese for it.

NZPA WGT pjg gt

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