Milk analysis may scrutinise supermarkets

Photo / Paul Estcourt

Commerce Commission plans to look at the supply of raw milk and manufactured dairy products may also open up the "cosy duopoly" of two big supermarket chains to scrutiny, Green MP Sue Kedgley says.

The commission today said it was analysing information on the production, processing and retailing of milk to see if it needed to inquire into whether the price of milk, or other aspects of the sector, should be regulated.

"The commission intends to review the operation of each of these levels and consider whether it should hold a price control inquiry," chairman Mark Berry said.

Ms Kedgley said even the fact that the commission had agreed to the preliminary inquiry would put "quite a bit of heat" on the production and sale of milk.

"I certainly hope that it may bring about some transparency," Ms Kedgley said.

The commission's disclosure that it is investigating whether it needs to carry out a full probe of the retail prices charged for milk came less than a week after Dr Berry told a parliamentary select committee that it would not hold an inquiry into milk prices but would hear arguments.

A spokeswoman for the commission said today: "There's still no intention at this time to launch an inquiry" but noted it had started a formal investigation of whether such an inquiry was needed.

Only two such inquiries have previously been held, both at the request of a minister, and even then only one of the recommendations for regulation was actually taken up by the Government.

Community groups led by Consumer New Zealand called for the inquiry but that lobby's chief executive, Sue Chetwin, told NZPA that it had not filed any formal complaint: that was more likely to have come from one of Fonterra's rivals.

She said today's announcement was a step forward.

"They are undertaking this preliminary analysis - at least they haven't closed the door on it," she said.

Ms Kedgley said she hoped the commission would not only cast some light on how retailers set their prices but would also take a closer look at whether regulatory changes were needed in the collection and processing of milk.

Fonterra collects more than 90 per cent of the nation's milk, and exports most of it but the co-operative's chief executive, Andrew Ferrier, has argued there is no need for an inquiry.

Milk prices were set as part of a normal commercial process and New Zealanders had to get used to being part of the global market, he said.

Fonterra Brands had frozen the wholesale price of domestic milk until the end of the year - a decision Mr Ferrier said was "good for business".

The retail price of milk rose from $1.69 a litre last June to $1.82 in January.

Agriculture Minister David Carter has said it would be a bad decision for the Government to intervene to lower prices.

- NZPA