Fonterra's market share in the South Island has slipped beneath the 80 per cent threshold specified in its enabling legislation, Minister for Primary Industries Nathan Guy says.
In the 2014/15 season, independent dairy processors collected 22 per cent of all milksolids in the South Island and 9 per cent inthe North, he said.
Under the Dairy Industry Restructuring Act (DIRA), the minister is required to certify when this threshold is reached. It triggers expiry of the pro-competition DIRA provisions in the South Island by no later than May 31, 2018, unless there is legislative change before then.
Monitoring of the amount collected by independent processors is required under the act, which allowed Fonterra to become established in 2001.
The act also contains provisions to promote the efficient operation of dairy markets in New Zealand through contestability in the farm gate and factory gate markets.
These provisions are intended to expire when there is sufficient competition.
The Commerce Commission will provide a report on the state of competition in the New Zealand dairy industry to the Government.
"The Government will need to consider next year whether to promote changes to legislation to extend the duration of the pro-competition provisions, or provide a transition pathway to deregulation, or a combination of both," Mr Guy said.
