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Fonterra's campaign to have the Government change rules aimed at giving its rivals a level playing field may not be welcomed at Cabinet level.
When the Ministry of Agriculture and Forestry warned in 2005 that Fonterra was worried about independent companies "cherry-picking" its most efficient farmers, the then
Agriculture Minister, Jim Sutton, said pressures on Fonterra's domestic milk supply might simply mean the governing legislation was working.
"The [Dairy Industry Restructuring] Act is creating the incentives that contribute to the goal of maximising the economic performance of the dairy industry," Sutton said at the time.
Fonterra announced on Wednesday night that it was rushing to the Government to have changes made to regulations under the 2001 act which contain measures to balance Fonterra's domination of the sector.
It said a Supreme Court decision on Wednesday upholding Commerce Commission rulings against Fonterra on technical issues over the way it priced raw milk meant its "farmers are unfairly subsidising other processors such as Open Country Cheese and Tatua".
The act requires Fonterra to supply up to 400 million litres of raw milk a year to independent processors at the same cost as Fonterra pays: up to 50 million litres for each processor.
Open Country Cheese receives a quarter of its milk from Fonterra, with 150 farmers supplying the rest.
The cheese company's founder, Wyatt Creech, expressed hope that Wednesday's "financially literate" decision by the Supreme Court would end years of litigation by Fonterra over the Commerce Commission oversight of its sales of raw milk to small independent rivals.
But Fonterra said the series of expensive legal cases - which it comprehensively lost in the nation's highest court - had led to the raw milk regulations losing credibility.
It said the legal requirement set out in the company's underpinning legislation for it to supply limited amounts of raw milk to independent processors was intended to assist new players with entry into the dairy market.
"This latest decision effectively means that Fonterra farmers will be subsidising established processors even more than they are now," the company said.
Legal sources said the Supreme Court decision locked the dairy giant into a long-term pattern for calculating the cost of its raw milk, effectively given the Commerce Commission an intrusive power to intervene in such commercial decisions, unless Fonterra did things in a particular way.
But Fonterra said both Open Country Cheese and Tatua had their own milk supply and could get as much milk as they needed without using the regulations.
"However, both take large amounts of milk under the regulations because it is cheap subsidised milk," a spokesman said.
"They pay less for the milk from Fonterra than they pay their own suppliers."
- NZPA