Will the Government Kill the Mega Merger? Monday, Jan 22, 2001
The Government gets down to the nitty-gritty of the mega merger proposal this week.
Comments by Jim Sutton suggest that the Government may be wishing to bet both ways on allowing the Commerce
Commission to provide a ruling on the issues.
Dragging in concerns about the long-term export efficiency of the mega structure as being a reason to
apply Commission rules to the merger can only be a red herring.
I wonder if such consideration was applied as Fisher and Paykel as they went about building their export
markets for whiteware?
It would be crass stupidity for the dairy industry to be stopped in its plan to develop international
market power by considerations of local market competitiveness. Milk and milk product pricing for
the local market has always been a contentious issue that has been made to reflect badly on farmer
producers. Whereas the only price variation possible in the local market arises from processing
packaging distribution and retailing component of the channel.
The industry wide losses as a result of the merger not proceeding should not be dictated by the theoretical
notion of local market competitiveness directed by government edict. If there is a local marketing
opportunity not serviced by the mega coop then organisations will establish to fill the gap.
The irony of reverse monopoly control from retail should not be overlooked as the retail organisations
such as Foodstuffs and Woolworth's position themselves to secure supply at best advantage by vertical
integration. They may even see the potential in farm ownership with sharemilkers to produce
really cheap milk - now, there is a possibility!