7 Jul 2010

Fonterra protests at having to subsidise competitors

4:47 pm on 7 July 2010

New Zealand's largest company is angry at being asked once again to subsidise a rival, under a law it says is being misused.

In the latest case, Fonterra is being asked for 37.5 million litres of milk by the Crafar farms applicant, Natural Dairy Holdings.

Fonterra is obliged to sell up to 600 million litres of milk a year to independent companies at cost. This rule was imposed when Fonterra was set up, to stop it exploiting its market power.

But overseas dairy companies from Singapore, Russia and Japan quickly saw their chance, and stepped in to buy Fonterra's milk cheaply and sell it profitably, competing against Fonterra offshore.

Even if Natural Dairy Holdings is successful in buying 16 of the Crafar farms in New Zealand, the Hong Kong-backed company will still be entitled to Fonterra's cheap milk.

Fonterra says subsidising its competition is not what was envisaged in the law that set it up.