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Current as of 30/12/14 05:40AM NZST

Christopher Adams

The Business Herald’s markets and banking reporter.

Baby-milk firms denied a hearing

Ministry refuses to let firms' statements be put before court at Fonterra sentencing.

Empty shelves after a recall of Nutricia infant formula which Danone said cost it millions. It is suing Fonterra over the incident. Photo / APN
Empty shelves after a recall of Nutricia infant formula which Danone said cost it millions. It is suing Fonterra over the incident. Photo / APN

Infant formula firms that claim to have lost millions as a result of Fonterra's botulism scare were told they were not victims and prevented from putting impact statements before the court when the dairy giant was sentenced on criminal charges related to last year's contamination false alarm.

Companies including French food group Danone and Auckland exporter KiwiMilk Nutrition requested their statements be put forward at Fonterra's sentencing on four Animal Products Act charges brought by the Ministry for Primary Industries in the Wellington District Court last month.

The co-operative pleaded guilty to all of the charges - including its failure to manufacture whey protein in accordance with a risk management programme and exporting product that did not meet food safety standards - and was fined $300,000.

Danone, the parent company of infant formula brand Nutricia, received baby milk base powder containing the whey protein wrongly suspected of being contaminated with a botulism-causing bacterium.

As a result, the Paris-based firm was forced to recall products across eight markets, including New Zealand and China. The company claims the scare resulted in more than 300 million ($484 million) in lost revenue and other costs.

Statements from the victims of crimes are often considered by judges during sentencing.

However, the ministry decided it would not treat Danone - which is suing Fonterra for compensation - as a victim under the Sentencing Act and Victims' Rights Act, according to a letter from the ministry's lawyer, Simon Barr, obtained by the Business Herald.

Reasons given by Barr included that the offences Fonterra pleaded guilty to were not "committed against" Danone and the firm had not suffered any loss or damage to property as a result of the offences.

Danone's vice-president of corporate communication, Laurent Sacchi, wrote that he was astonished by the decision in a letter sent to the ministry's director-general, Martyn Dunne.

"The reasoning suggests to us that [the ministry] views breaches of New Zealand's food safety laws as victimless crimes and that it views the offending as being of a narrow regulatory nature," Sacchi said.

He said Fonterra's "serious failings" could have put infants' lives at risk.

"The international food safety community, not to mention consumers around the world, would be most concerned to learn that [the ministry] takes this view of the impacts of breaches of food safety laws."

In his impact statement KiwiMilk founder Marco Marinkovich estimated the botulism scare had cost the company and its Chinese distributor up to $5.5 million through lost sales, brand damage and "costs to rebuild".

Marinkovich was told by Barr that his firm was not a victim of Fonterra's offences for a number of reasons, including the fact that KiwiMilk had not received any of the whey protein that sparked the food scare.

The ministry "did not go out and talk to all the companies who were the collateral damage - the victims - because they wanted to minimise the disruption and contain the issue that I believe was a damage control and PR exercise", Marinkovich told the Business Herald.

Two additional New Zealand infant formula firms are understood to have prepared impact statements that were prevented from being put before the court.

The legal action and Fonterra's early guilty pleas were widely seen as a public relations exercise to placate China's Government after the disruption the botulism debacle caused in that country.

The guilty pleas came just days before Prime Minister John Key travelled to China on a visit largely aimed at repairing New Zealand's reputation for safe dairy products.

The ministry's director of compliance, Dean Baigent, said it did not discuss the victim impact statements with Fonterra.

Fonterra said it was not notified about the statements.

- NZ Herald

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