Your views sought
MPI is seeking views on proposed changes to the Dairy Industry Restructuring Act 2001 (DIRA) and the Dairy Industry Restructuring (Raw Milk) Regulations 2012. MPI welcomes your feedback on the proposals, which are outlined in the discussion document.
Discussion document
Public meetings
MPI is holding a series of public meetings to share information and answer questions on the proposed changes. For more information about the meetings, or any other inquiries:
- Phone: MPI 0800 00 83 33
- Email: dairy.consultation@mpi.govt.nz
DIRA consultation public meetings
| Location | Date & time |
Wellington | Friday 3 June, |
Hamilton | Wednesday 8 June, 2pm – 3.30pm |
Christchurch | Friday 10 June, 2pm – 3.30pm |
Stratford | Monday 20 June, 1pm – 2.30pm |
Invercargill | Wednesday 22 June, 2.30pm – 4.00pm |
Summary of proposals
It's proposed to:
- reset the DIRA market share thresholds, which will delay the expiry of some efficiency and contestability provisions
- amend these provisions to provide a transition pathway to eventual deregulation.
Details of the proposed changes are in the discussion and include amending the:
- sunset provisions to remove the default expiry and reset the market share thresholds
- Raw Milk Regulations to reduce the volumes available to independent processors, including removing the requirement for Fonterra to sell regulated raw milk to large, export-focused processors
- open entry provisions so that Fonterra is no longer required to collect milk from new dairy conversions.
The proposed changes are not intended to alter any other aspects of the current regulatory regime under the DIRA.
Making a submission
There are 3 ways to make a submission before public consultation closes at 5pm on 29 June 2016.
Only 1 submission per individual is allowed. But you can make a submission as an individual, and another submission on behalf of an organisation you represent.
Submission methods
Online survey
Submit your comments and responses online to the questions set out in the discussion document. (The online survey has been created using Survey Monkey).
Instructions for using Survey Monkey
You must select 'Submit form' on the last page to save your responses. If you do not select 'Submit form' MPI will not receive any of your feedback. You can come back to your partly filled in form at a later day or time, but only if you use the same computer.
Your name and contact details are required as a record of the public submissions received.
If you have any problems with this online survey, email: dairy.consultation@mpi.govt.nz
Email your comments to: dairy.consultation@mpi.govt.nz
Post your comments to:
Dairy Consultation
Animal Sector Policy
Ministry for Primary Industries
PO Box 2526, Wellington, New Zealand.
You may wish to use the following template which sets out the questions from the discussion document to aid your submission.
Discussion document questions – use this template to help you make a submission
Email and postal submissions should include:
- the title ‘DIRA Consultation’
- your name and title
- your organisation's name (if you are submitting on behalf of an organisation), and whether your submission represents the whole organisation or a section of it
- your address and email contact details.
Your name and contact details are required as a record of the public submissions received.
How your submission will be used
Once the consultation period closes, MPI will hold the submissions securely to analyse the feedback received. This information will be used to advise Ministers, create policy and make decisions.
A summary of submissions will be posted on this website. Submissions will be collated so that information will not be attributed to any individual or company. But note that submissions are public information and may be the subject of requests under the Official Information Act 1982 (OIA).
To find out more about MPI's privacy policies, email CPO@mpi.govt.nz
Submissions are public information
Note that your submission is public information. Submissions may be the subject of requests for information under the Official Information Act 1982 (OIA). The OIA specifies that information is to be made available to requesters unless there are sufficient grounds for withholding it, as set out in the OIA.
Submitters may wish to indicate grounds for withholding specific information contained in their submission, such as information being commercially sensitive or they wish personal information to be withheld. MPI will take such indications into account when determining whether or not to release the information. Any decision to withhold information requested under the OIA is reviewable by the Ombudsman.
Background
New Zealand’s largest dairy business - Fonterra - was established in 2001 through the merger of the two largest domestic dairy co-operatives and the New Zealand Dairy Board.
Efficiency and contestability provisions
When it was formed, Fonterra collected about 96% of New Zealand’s raw milk production. To enable Fonterra’s creation, the DIRA was implemented to provide an exemption from the merger provisions of the Commerce Act 1986.
To address Fonterra’s market dominance, the DIRA includes provisions in Part 2, subparts 5 and 5A to promote efficiency and contestability in New Zealand dairy markets. The current provisions include:
- Open entry and exit – Farmers must be able to enter and exit the co-operative without unreasonable restrictions or penalties and Fonterra must accept all milk supplied by shareholding farmers.
- The 20% rule – Shareholding farmers can allocate up to 20% of their weekly production to independent processors.
- Milk Price Monitoring Regime – The Commerce Commission reports annually on Fonterra's milk price manual and the setting of the base milk price under the manual.
In addition to Subparts 5 and 5A, the Dairy Industry Restructuring (Raw Milk) Regulations 2012 require that independent processors must be able to obtain raw milk to enable them to compete in dairy markets.
Expiry process for certain efficiency and contestability provisions
Most of the efficiency and contestability provisions were always intended to be temporary and only necessary until sufficient competitive pressure could be applied on Fonterra by existing and potential future competitors. Therefore, the DIRA includes sunset provisions, which were triggered in the South Island in the 2014/15 dairy season when over 20% of milk solids were collected by independent processors.
However, the market share threshold alone is not conclusive evidence that sufficient competition has developed. Therefore prior to the expiry of the efficiency and contestability provisions an independent report on the state of competition in the New Zealand dairy industry is required.
Once the Minister for Primary Industries has given notice of the threshold being met and has responded to the report on the state of competition, the Governor-General must declare, by Order in Council, that the particular provisions in subpart 5 and 5A will cease to apply to the island in which the threshold has been met.
State of competition report by the Commerce Commission
The Commerce Commission report, released on 1 March 2016, considered whether domestic dairy markets would be more or less efficient in the absence of the different components of the DIRA regime. The report found that competition in the industry is not yet sufficient to warrant full deregulation at this time. The Commerce Commission recommended removal of the current default expiry provisions and another state of competition review either:
- when independent processors achieve a 30% market share in the North Island or South Island, or
- after 5 years (the end of the 2021/22 season).
The Commerce Commission also recommended that the Government consider:
- amending the raw milk regulations to facilitate the development of competition in the factory gate market and reduce dependence on regulated raw milk. (The factory gate is the market where raw milk is traded between dairy processors. The farm gate is the market where dairy processors purchase raw milk from farmers.)
- amending the open entry provisions so that Fonterra no longer has to accept an application from a new dairy conversion to be a shareholder supplier.