Government Comment On Mega-coop Proposal For New Zealand Dairy Industry

Food and Fibre Minister, Hon John Luxton, today welcomed recent comments from leaders in the New Zealand dairy industry that it is time to "get to the future."

"It is encouraging that the industry is now willing to ask the hard questions", Mr Luxton said. "The current structure is heavily regulated and inflexible. The challenge is to move to a flexible, commercial structure which stands on its own feet."

The Minister then observed that several options could be considered. "The idea of a 'mega-coop' is one of those options. As with all of the recent mergers, the Commerce Act framework would still need to be applied."

This means that if a firm (for example, a mega-coop) is likely to acquire or strengthen a dominant position in a New Zealand market, then the parties involved would need to obtain an authorisation from the Commerce Commission.

Under this process, the Commission decides whether the 'public benefits' of the proposal are likely to outweigh the detriments to competition. In forming this view, the Commission is likely to closely examine the expected impacts on costs, prices and innovation all of which will impact on farmers.

"If normal benefits of competition are to be significantly reduced, there must be significant off-setting benefits. This is what the Commission decides."

Mr Luxton concluded by noting that the government's key policy objective is to improve New Zealand's economy performance. "We need to have a framework which puts real pressure on costs, ensures efficient prices, promotes innovation and improves returns from international markets.