Fonterra's shareholders' council says the overhaul of the dairy co-operative's enabling legislation will end up regulating farmers' earnings and sapping the life from New Zealand's biggest export.
The Dairy Industry Restructuring Bill, tabled in Parliament this week, replaces the law that allowed Fonterra to be created.
The co-operative will now be monitored by the Commerce Commission over its farm gate price and will be required to disclose its pricing model.
"We haven't seen that sort of thing in New Zealand since the 1970s and no one will increase their investment in an industry at risk of such Government intervention," said shareholders' council chairman Simon Couper.
The bill is part of an omnibus of charges planned for Fonterra.