Fonterra 'disappointed' by Commerce Commission findings

Transport charges imposed by Fonterra on the independent Open Country Cheese company were unreasonable and in breach of regulations, the Commerce Commission has found.

It ordered that $211,426 in compensation be paid to Open Country and that Fonterra lower transport charges by 22 per cent.

The dispute is over transport costs paid by the Waharoa-based company when it purchases raw milk from Fonterra.

The commission ruled Open Country be charged 17.15c per kg of milksolids.

It held a conference in August on the issue, the first big regulatory challenge to Fonterra under the legislation that enabled the Fonterra mega-merger.

Open Country - the first new independent cheesemaker to open since 2001 - last year complained to the commission that Fonterra had been charging the equivalent of 22.1c/kg milksolids for transport of raw milk. Open Country said the independent Tatua Co-operative Dairy in nearby Morrinsville spent between 6.19c/kg and 8.6c/kg milksolids on transport.

Regulations introduced in 2001 require Fonterra to supply Open Country with raw milk at the default milk price, the wholesale price of milk plus reasonable transport costs.

Fonterra has yet to decide whether to appeal the decision.

Fonterra spokesman Barry Harris said the decision was disappointing, as Fonterra believed the method it had used was a straightforward and transparent one that ensured a level playing field for all independent processors.

Until now, Fonterra had charged all its customers the same transport rate paid by the co-operative's supplier-shareholders.

"However, the decision requires Fonterra to calculate a separate set of costs for each customer, according to a formula designed by the commission," Harris said.

Fonterra and its customers would still be able to negotiate an agreed price other than the default price.

Harris said that if Fonterra were to apply the commission's formula to all customers, more than half would pay more for their milk than they did at present.

- NZPA