Dairy co-operative Fonterra is challenging a Commerce Commission ruling that requires it to supply raw milk to two independent processors.
Last month the Commerce Commission confirmed its initial finding that the Grate Kiwi Cheese and Kaimai Cheese companies have been unfairly treated by Fonterra.
Under law, Fonterra has to supply up to 50 million litres of raw milk to each independent processor.
The commission found that Fonterra had breached the regulations by not supplying Kaimai and Grate Kiwi with milk since the beginning of October last year, and has ordered it to pay them compensation.
Fonterrra is appealing against the Commission's decision on the grounds that it is not consistent with the purpose of the Dairy Industry Restructuring Act or the regulations.
The co-operative says the ruling was based on false information, will end up costing farmers more money and will open up the supply of raw milk to other food and drink processors.
Fonterra also disputes the finding that it did not supply milk to the two companies and is challenging the compensation order.
Milk supply director Barry Harris says the raw milk regulations are costing each of its farmer suppliers about a thousand dollars a year.
He says new rules for the regulated milk price are being put in place, and it is not fair for its farmers to be exposed to an unnecessary cost while that's happening.