By LIAM DANN
The Commerce Commission has ruled Fonterra breached the Dairy Restructuring Act last year and must pay compensation of about $60,000 to a small Auckland milk processor.
Fonterra breached the act when it refused to supply Independent Dairy Producers (IDP) with raw milk at default prices for two months last
year, the commission said yesterday.
A default milk price was built into the Fonterra's founding legislation to reflect the dominance it would have in the domestic market.
Under the regulations an independent processor may require Fonterra to supply raw milk at the default price unless there is already a price agreement between the parties and as long as the independent processor has provided estimates of its requirements.
This dispute related to the date at which Fonterra was required to stop charging IDP a premium price.
The decision was only a partial victory for IDP as it overturned a draft decision that could have cost Fonterra a lot more.
IDP had sought compensation for being charged a premium price from November 2001 to July 31, 2002, but the commission ruled that Fonterra was in breach from June 1, 2002 to July 31.
Fonterra must pay compensation equal to the difference between the price paid by IDP and the default milk price at the time.
The exact total is still being calculated but is likely to be about $60,000.
IDP chairman Don Cowie said he was pleased to get a result and some compensation.
The money might not be much to Fonterra but it was significant to a small company, he said.
IDP has sales of about $5 million compared with Fonterra's $14 billion.
In a statement Fonterra welcomed the revised ruling but said it was deeply concerned about the implications of the decision.
The commission said this was the first application from a party in dispute with Fonterra. Others pending include a dispute with A2 Corporation.
