Open Country may appeal Fonterra ruling

Waikato dairy company Open Country Cheese is considering appealing a ruling that Fonterra can use profits from share sales to bump up the price it charges independent processors for milk.

"We're having our lawyers look into it," said Open Country chief executive Alan Walters, who expects a decision within weeks.

The Commerce Commission ruled last week Fonterra did not breach dairy regulations by including retained profits from selling shares in Wrightson and National Foods when it calculated the wholesale milk price last season.

Fonterra, which received $208 million gross from the sales, said afterwards it had always been confident it was complying with the rules.

The decision meant Open Country had to pay Fonterra more than $700,000 extra for milk from last season than it would have if the share sale profits were not included.

Walters said he had no problem with retained profits generally being part of the formula used to set prices.

He said total payout to farmers for milk, plus retained profits from other activities, minus an assumed rate of return on farmers' shares, helped set a proxy price for what Fonterra farmers were theoretically able to be paid for their milk. The "proxy price" became the basis for the wholesale price charged to rivals.

"That's fine because they could pay it [retained profits] out and, therefore, it would reflect in their milk price."

Open Country's contention was that the Wrightson and National Foods share sales were "one-offs" of a capital nature and related to investments.