Fonterra takes lawsuit to high court

Fonterra is taking its legal battle against two small dairy processors, Grate Kiwi Cheese Co Ltd and Kaimai Cheese Co Ltd to the Supreme Court in New Zealand. Appeal Court judges had ruled in March that both companies were “independent”, meaning both companies were eligible to be supplied with raw milk from Fonterra farmers and pass the milk on to one of Fonterra’s big domestic rivals for toll processing.
This means that the dairy companies could ask for 50 million litres a year from Fonterra and require the cooperative to deliver it to a bigger company’s factory for processing. Fonterra unsuccessfully argued such companies were only “virtual processors” and not entitled to the milk.
Fonterra is arguing the Court of Appeal incorrectly applied the Dairy Industry Restructuring (Raw Milk) Regulations 2001, which ensured competition after Fonterra was formed, The law requires Fonterra to supply “regulated” and relatively cheap milk to smaller processing companies.
Grate Kiwi and Kaimai argued back in 2008 that any person who carried out some processing of any kind of milk or dairy product should be able to have up to 50 million litres of cheap milk delivered to the factory of their choice. But Fonterra has said the two companies were passing on their milk to Open Country Cheese to be made into cheese, which they then processed and packaged.

If Kaimai and Grate Kiwi were supplied with raw milk at cost price it could mean any company that processed dairy foods of any kind could get cheap milk from its farmers, Fonterra said earlier this year. Grate Kiwi began grating and blending cheese for the New Zealand market in 1991, when it was called Oceanic Foods. Fonterra controls nearly 95% of the nation’s milk production, which is about 16 billion litres per year, and it provides 600 million litres to rivals.