New Zealand joins Australia in OK’ing milk pricing behaviour

By Shane Starling

- Last updated on GMT

Related tags Milk

New Zealand joins Australia in OK’ing milk pricing behaviour
The New Zealand Commerce Commission says there are no grounds for an investigation of wholesale and retail milk pricing practices in the New Zealand market that is 90% dominated by Fonterra.

Its decision not to investigate claims Fonterra was abusing its dominant position to keep prices artificially high, followed a similar ‘no worries’ verdict delivered recently by the Australian Consumer and Competition over pricing practices of mega-retailer Coles.

The New Zealand Commerce Commission considered four markets:

  • markets for the supply of raw milk by farmers to processors (farm gate supply);
  • markets for the supply of raw milk by processors of raw milk to other processors (factory gate supply);
  • markets for the processing and wholesale supply of fresh processed milk (town milk) to retailers;
  • markets for the retail supply of grocery items, including fresh processed milk.

The Commission considers that a full pricing inquiry is not warranted at this time into any of the milk markets considered,”​ it wrote. “This decision is based on our analysis of the state of competition in the relevant markets… Our conclusions are also strongly influenced by the parallel ongoing interdepartmental reviews of the Raw Milk Regulations and Fonterra’s farm gate price.”

There had been complaints from independent operators that the farm gate prices were too high, but the Commission found otherwise. However the New Zealand Ministry for Agriculture and Foresty is conducting investigations of its own into milk production and sale practices.

“At the retail level there is competition between the two major supermarket chains, dairies, service stations and other retailers,”​ said Commission chair Dr Mark Berry.

“At the wholesale level, it is the competition between Fonterra Brands and Goodman Fielder that exceeds the little or no competition threshold.”

Analysts have been saying dairy prices are close to bottoming out with Fonterra paying between $7.15 and $7.25/kilo for the 2011-2012 season.

Fonterra said there was, “no justification for a price control inquiry or further regulation at any level of the milk market”, ​adding, “It is ironic that a voluntary price freeze could be viewed as breaching legislation which has the ‘benefit of consumers’ at its core.”

The New Zealand Commerce Commission decision can be found here.

Last week the Australian Consumer and Competition commission found Coles was justified in discounting house-brand milk.

Related topics Markets Oceania Supply chain Dairy

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