No evidence freight alliance will attract big ships, says Open Country

Tuesday 8th November 2011

A container freight alliance advocated by Fonterra Cooperative Group won’t bring forward the arrival of larger container ships to New Zealand, Open Country Dairy says.

The cooperative’s dairy rival opposes the formation of Kotahi Logistics by Fonterra and meat company Silver Fern Farms in a submission to the Commerce Commission, arguing no meat or dairy company will join the alliance for confidentiality reasons.

"This freight cartel may well derive benefits for the select few who join but the cost of providing those benefits to cartel members will simply be borne by competitors who will pay more for their freight or consumers with higher prices," Open Country chief executive Steven Smith says.

In its application for approval Fonterra cites industry reports about the risk of shipping companies establishing hub ports in Australia and argues that larger container ships may be deployed to New Zealand earlier if demand for services is consolidated.

"The application suggests that Project Kotahi is likely to bring forward port investment and the use of larger lower cost ships for New Zealand ocean carriage. This assumption is not supported with any credible evidence," Open Country says.

The argument about big ships was a convenient claim and freight cartels would reduce profitability in the port sector, which would lead to disinvestment, Open Country says.

"There is no material evidence to support the claim that a New Zealand absent a Kotahi will result in all future export freight hubbed through Australia."

Open Country competes with Fonterra. It has expressed concern about the size, power and special privileges Fonterra gets from New Zealand policy makers since it was formed in 2001.

Fonterra's usage of containerised freight services dwarfs that of any other user, giving it artificial scale advantages. The proposal seeks to further enhance an already significant competitive advantage that will further widen the gap between Fonterra and its competitors.

(BusinessDesk)

BusinessDesk.co.nz

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