"One executive said of course they could avoid that by sharing up early like everyone else under a growth contract; the senior executive comes back and says we shouldn't allow that, we should prohibit sharing up for at least a year," Goddard said. "The whole point of this was that there should be a penalty, and that it should stick for at least a year."
Goddard said Fonterra hadn't sought to pay the farmers less because of the cost of acquiring NZDL's assets, as those were sunk costs, and evidence in earlier hearings was that the company doesn't seek to recover differential costs of taking milk from different farmers.
"It's not as if Fonterra said, how can we afford this price, only if we get this corresponding reduction in what we pay for the milk," Goddard said. "It was very optics-driven, not only to these farmers but to future farmers who might consider leaving Fonterra in the hope of coming back. This was a signal that there would be consequences for doing that."
Earlier in the day Fonterra's QC, Jack Hodder, said DIRA wasn't a "dairy farmer's bill of rights" but was there to regulate milk supply in a way that enhances contestability, and the South Canterbury farmers didn't count as new entrants.
"These people were not seeking to or part of the contestability processes, it wasn't an open-entry, open-exit exercise in any sense. It was a contractual arrangement," Hodder said. "Nothing in this Act abolishes the power to have a contract that isn't one of share-backed supply."
The hearing is set down for two days, with Goddard set to continue submissions tomorrow.