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Dairy Industry Restructuring Act: Fonterra in breach

The Commerce Commission has found that Fonterra Co-operative Group Limited (Fonterra) breached the Dairy Industry Restructuring (Raw Milk) Regulations 2001 and has ordered Fonterra to pay compensation to Independent Dairy Producers Limited (IDP).

The Commission today published its final determination relating to a dispute about the price IDP paid Fonterra’s wholly owned subsidiary New Zealand Milk Products (NZMP) for raw milk.

IDP applied to the Commission for a determination relating to its supply of raw milk over a ten month period between 2 November 2001 and 1 August 2002. The Commission has determined that for the period from 1 June 2002 to 31 July 2002, IDP was entitled to raw milk supply at the default milk price.

As part of its determination, the Commission has ordered NZMP to pay compensation to IDP equal to the difference between the price actually paid by IDP and the default milk price (when determined) for the supply of raw milk for the period from 1 June 2002 to 31 July 2002.

The Commission’s Director of Business Competition, Geoff Thorn, said this dispute centred on the interpretation and application of the raw milk regulations.

“Under the raw milk regulations, an independent processor like IDP, may require Fonterra to supply raw milk at the default milk price unless there is already a price agreement between the parties for the supply of that raw milk, and provided the independent processor has provided estimates of its requirements, in advance of supply if required by Fonterra.” said Mr Thorn.

This is the Commission’s first application from a party in dispute with Fonterra for a determination.

The Commission’s final determination is available on (select Dairy Industry Restructuring Act, Commission Decisions).

Commission media releases can be viewed on its web site

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