June 20, 2008

Inquiry into Dairy Prices


THE Commerce Commission has started delving into allegations that consumers are paying too much for dairy products.

A spokesperson said it was gathering information from market participants in the domestic milk market in order to better understand the issues arising around increasing dairy product prices.

Kaimai Cheese chairman and former deputy prime minister Wyatt Creech said he had complained to the commission about the "anti- competitive" way Fonterra used its 96 per cent dominance of the New Zealand milk market.

"The commission have said there's enough substance to the complaint that it requires further investigation," Mr Creech said.

Fonterra said it had not been approached by the commission.

"There is plenty of competition in the retail milk market and we comply with all the regulations," a spokeswoman said.

Cheese, butter and milk, the three main dairy items on Kiwi shopping lists, have increased dramatically in recent months.

The general message to the public was that increasing international dairy prices had affected local prices, but Mr Creech argued this could only account for some of the increase.

He said the approximate $1 rise in the price of a litre of milk in the past 12 months was far above the necessary increase.

His complaint to the commission said Fonterra was using its market strength and ability to suppress competition to overcharge the local market.

The commission said it was not a formal investigation yet, but a look at "what functional level it may be that competition concerns may arise", as part of its general role in monitoring and surveillance of markets.

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