Fonterra's Kotahi JV unlikely to reduce competition, regulator says

Friday 16th December 2011

Fonterra Cooperative Group’s Kotahi freight alliance with Silver Fern Farms won’t make much impact on competition in the transport market and will not need to be authorised by the antitrust regulator.

The joint venture would be unlikely to harm competition and doesn’t need authorisation under the Commerce Act, the Commerce Commission said in its draft decision. Fonterra asked the antitrust regulator to run the ruler over the deal to make sure it didn’t fall foul of legislation.

“Based on our investigation and having interviewed a significant number of the parties likely to be affected by the joint venture, we have concluded that there would be little difference in the market whether or not the Kotahi venture is in place,” chairman Mark Berry said. “There must be a lessening of competition through the proposed arrangements of the joint venture for the commission to consider granting an authorisation.”

Fonterra wants to form an alliance of container freight users to increase its bargaining power with shipping lines. Importers labelled the Kotahi proposal as “central planning” in their submission, while Fonterra rival Open Country Dairy said it doubted the partnership would achieve its aim of attracting larger container ships to New Zealand.

Fonterra's use of containerised freight services dwarfs that of any other user, giving it scale advantages.

Berry said the draft determination means the Kotahi partnership can proceed, but won’t have protection from potential prosecution under the act that authorisation provides. Still, any party would need to change the regulator’s mind and prove the arrangement would likely harm competition.

BusinessDesk.co.nz

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