Fonterra Gets The All Clear

Fonterra Gets The All Clear

The Commerce Commission has cleared Fonterra Co-operative Group Limited to acquire the dairy processing assets of New Zealand Dairies Limited (in receivership). New Zealand Dairies processes raw milk at its Studholme factory near Waimate.

“Comparing the acquisition by Fonterra to the scenario where another bidder would acquire NZDL’s assets, the Commission is satisfied that the acquisition would not be likely to result in a substantial lessening of competition. The Commission also considers that Fonterra’s cooperative ownership structure and the regulatory environment in which it operates, together with its national raw milk pricing strategy, removes Fonterra’s incentive and ability to depress the prices it pays farmers for raw milk in the South Canterbury and North Otago regions,” said Commerce Commission Chair Dr Mark Berry.

Dr Berry added that given that the Studholme factory produces milk products for export rather than domestic consumption, and would likely continue to do so whoever acquires it, the Commission has not had to consider downstream markets in New Zealand for dairy products such as butter and cheese in this instance.

In addition to the clearance decision, the Commission also decided that it was unlikely that the Operational Agreement between the Receivers and Fonterra, which provided for the continued operation of the Studholme plant for the 2012/2013 milking season, resulted in a substantial lessening of competition.

A public version of the written reasons for the decision will be available soon on the Commission‘s website at www.comcom.govt.nz/clearances-register

Background

New Zealand Dairies was placed in receivership on 17 May 2012 owing a substantial amount to its supplier farmers for the raw milk they supplied in the 2011/2012 milking season. Its factory produces milk powder solely for export markets.

Fonterra acquires and processes about 90% of the raw milk produced by New Zealand’s dairy farmers. Fonterra has agreed with the receivers of New Zealand Dairies to fund and operate the New Zealand Dairies factory during the 2012/2013 milking season.
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