The Commerce Commission has ruled out an inquiry into milk prices - but all hope is not lost for struggling families, a Northland health official says.
Manaia Health PHO chief executive Chris Farrelly, who called for the inquiry with his public concerns over the price of milk, said that while disappointed with the commission's decision he was encouraged the recommendations had been forwarded to the inter-departmental government review.
Mr Farrelly challenged supermarkets, Fonterra, Goodman Fielder and other companies to lower domestic milk prices so that thousands of struggling families could afford to buy it.
He started a nationwide debate earlier this year when he said the high cost of milk was hurting poor families and damaging children's health.
Fonterra Shareholders Council chair Simon Couper said the commission's decision was a vindication for all Fonterra farmers.
"After years of contentious debate, [the] decision was a justification of what we have said all along - that the farm gate milk price is fair and reflects the capital and production costs incurred in the dairy industry," Mr Couper said.
He claimed calls for an inquiry into milk prices were cooked up by Fonterra's competitors, whose agenda had never been about protecting the domestic market but about ensuring they received an easy ride at the expense of the public.
In March, a series of complaints prompted the commission to begin an inquiry on whether it should recommend to the Government that price control be imposed on the sale of milk.
Commission chairman Mark Berry said that overall, analysis showed the level of competition and existing regulation arrangements meant intervention under Part 4 of the Commerce Act was not possible.
Under Part 4, price control can only be recommended if "little or no competition" exists or is "likely to substantially increase" in a market.
The commission interviewed 32 participants in the four levels of the domestic milk market - farm gate, factory gate, wholesale and retail supplies.
At the farm gate supply level, it found it did not have the grounds to intervene, even though there was little competition.
Dr Berry said competition existed at the retail level between the two main supermarket chains while for wholesale milk, Fonterra and Goodman Fielder competed for supplies.
At the factory gate, the regulator concluded there was "little or no competition in the market" and little prospect of an increase in competition.
However, Dr Berry said factory gate supply was already regulated under the Dairy Industry Restructuring Act and the Raw Milk Regulations, which were designed to constrain Fonterra's market power.
He said the commission was also mindful that a full inquiry would be premature, given the regulations were under review by Treasury and might be amended.
The commission considered international prices of dairy products and the effect on domestic retail prices purely as background.
On why milk was cheaper overseas, the commission said it was apparent that New Zealand supermarkets had not priced milk as aggressively as in Australia.
"This may reflect that competition in the supply of groceries from supermarkets is less intense than in Australia.
"Alternatively, it may suggest that the competition dynamic is different, and competition focuses on other products or aspects of their offering," the commission said.
Hope still held over milk prices for Northland families
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