KEY POINTS:
Fonterra is to introduce "tactical pricing" to stop rivals pinching suppliers off the co-op in Canterbury and Waikato.
Normally, Fonterra farmers hold shares in the co-op in proportion with the milk they supply, with all shareholders paid at the same rate.
But, under the new scheme, if a farmer can show they have a bona-fide offer from a competitor, Fonterra will come up with a "one-time" counter-offer. Different farmers could be offered different prices.
The catch is that the Fonterra supplier will have to sell all their shares and supply the co-op under a special contract.
The aim of forcing a share sale is so that different co-op shareholders are not being paid different rates for milk.
Fonterra's new scheme, to be introduced next season, is a direct response to the threat from Open Country Cheese and Tatua in the Waikato, and New Zealand Dairies and Synlait in the South Island.
Open Country said last October it had 100 suppliers this season compared to 26 suppliers last season.
Fonterra chairman Henry van der Heyden said the scheme was discussed with shareholders last month.
"We advised that next season we had decided to implement a more flexible approach to enable higher spot pricing of contract milk only, as it was in the co-operative's interests to ensure we could compete aggressively for supply in areas where we face competition.
"During the next 12 months farmers will see Fonterra implement tactical pricing in the Waikato and Canterbury and other areas where there are active competitors, but only if and when it will benefit the co-operative as a whole," he said.
The policy would be implemented for a year and then reviewed.
Dairy Farmers of New Zealand chairman Frank Brenmuhl warned it was possible the new scheme may attract attention from the Commerce Commission if it was seen as Fonterra using its size, and subsidisation from other co-op suppliers to block rivals from expanding.
Of the potential for the scheme to contravene competition regulations, Open Country's chief executive Alan Walters said: "We'll certainly be having a look at it from that angle."
However, a Fonterra spokesman said the co-op was confident the scheme would not contravene competition regulations.
