Fonterra's proposed Kotahi joint venture unlikely to lessen competition - draft decision by Commerce Commission
Published16 Dec 2011
The Commerce Commission has reached a preliminary view that a proposed joint venture between Fonterra Co-operative Group Limited and Silver Fern Farms Limited would be unlikely to harm competition, and therefore does not need an authorisation under the Commerce Act.
The Commerce Commission has reached a preliminary view that a proposed joint venture between Fonterra Co-operative Group Limited and Silver Fern Farms Limited would be unlikely to harm competition, and therefore does not need an authorisation under the Commerce Act.
In September Fonterra lodged an application for authorisation with the Commission, in relation to the future activities of Kotahi. Kotahi intends to coordinate domestic and international freight services for its partners and customers. Fonterra applied for an authorisation as it was concerned the joint venture's activities may breach the Commerce Act.
To grant an authorisation the Commission must first establish that the joint venture would lessen competition in the relevant markets. If it is likely this would occur, then the Commission must decide whether the benefits of the venture would outweigh the loss of competition. If an authorisation was granted the companies involved would have immunity from prosecution under the Commerce Act.
"We have examined the areas of concern raised by Fonterra and have reached the view that none of the arrangements proposed is likely to lessen competition or breach the Commerce Act. There must be a lessening of competition through the proposed arrangements of the joint venture for the Commission to consider granting an authorisation. For this reason our draft determination is to decline to grant an authorisation," said Dr Mark Berry, Chair of the Commerce Commission.
"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," said Dr Berry.
The Commission's draft determination means that the Kotahi joint venture can go ahead but it would do so without the protection from potential prosecution under the Act that an authorisation provides. However, any party wishing to take such action would need to prove that, contrary to the Commission's view, the arrangement would be likely to harm competition.
"Should the facts of the situation change materially at any time, such that a substantial lessening of competition arises, the Commission can decide to reopen matters," said Dr Berry.
Interested parties are able to make submissions on today's draft determination. Submissions close on 16 February 2012. The draft determination is available on the Commission's website at
The Commission may grant an authorisation for arrangements or practices which may be in breach of the trade practice provisions of the Commerce Act if it is satisfied that the public benefits of the arrangement outweigh the harm arising from the loss of competition.
The granting of an authorisation protects the parties from action under the Commerce Act by the Commission and private individuals.
