No reason for milk price probe - Fonterra

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Fonterra has welcomed the Commerce Commission's decision not to make an inquiry into the price of milk.

The dairy co-operative always believed there was no justification for a price control inquiry or further regulation at any level of the milk market, chief financial officer Jonathan Mason said yesterday.

Fonterra's competitors led the call for an inquiry, wanting to force down the amount they paid farmers for raw milk, Mason said.

The co-operative still faced several other probes - including one into alleged abuse of market powers.

In March, the commission began investigations into whether it should make a formal inquiry into the price of milk, under Part 4 of the Commerce Act, which regulates markets with little competition and little likelihood of an increase in competition.

"The level of competition, taking into account existing regulation arrangements, means that intervention under Part 4 of the Commerce Act is not possible," commission chairman Mark Berry said yesterday.

But he said the commission was still dealing with complaints laid under Part 2 of the act, which prohibits parties with substantial market power interfering with competition.

Fonterra Shareholders Council chairman Simon Couper described yesterday's announcement as "vindication" for all Fonterra farmers.

He found it "ludicrous" that the co-operative had been labelled as anti-competitive. There were at least 25 other processors in the country whose production had risen by 400 per cent in the past decade.

The Commerce Commission intended reviewing complaints that a move by Fonterra Brands New Zealand (FBNZ) to freeze the price of liquid milk sold to retailers might have breached the Commerce Act.

In February, FBNZ decided to freeze liquid milk prices for the rest of the year, meaning it would absorb the impact of further commodity price rises. It was ironic that a voluntary price freeze could be viewed as breaching legislation which had the "benefit of consumers" at its core, Mason said.

In June, three government ministries - Agriculture and Forestry, Economic Development and Treasury - announced they had launched a separate inquiry into prices. Otago Daily Times