Fonterra to Respond to Commerce Commission

29 April 2005

Fonterra to Respond to Commerce Commission Preliminary Ruling on Open Country Cheese Dispute

Fonterra Co-operative Group says it will be making submissions to the Commerce Commission on the regulator’s draft determination that the price Fonterra is charging Open Country Cheese for transporting raw milk does not comply with Fonterra’s obligations under the Dairy Industry Restructuring (Raw Milk) Regulations.

Under the Regulations, Fonterra is required to supply independent processors with raw milk priced at a default milk price. This price is calculated according to a formula contained in the Regulations. The Regulations also allow Fonterra to charge independent processors reasonable transport costs.

In line with this, Fonterra charges these processors a transport component which reflects the company’s average cost of transporting milk. Fonterra believes this is the fairest way of dealing with transport costs.

Open Country Cheese argues that its factory’s location – near many of Fonterra’s Waikato suppliers – means it should pay a lesser charge.

The Commerce Commission decision means Fonterra would be subsidising Open Country Cheese, said Fonterra General Counsel David Matthews.

“While Open Country may benefit from this determination, other small processors may end up paying more under the system proposed by the Commerce Commission.”

Interested parties now have until June 10 to make their submissions to the Commission on its draft determination.

ENDS

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