Australia shouldn’t seek to emulate Fonterra, competition review finds

Share on twitter
Share on facebook
Share on linkedin
Share on whatsapp
Share on email
CREATING national agribusiness champions by relaxing competition laws could hurt consumers, a new report predicts.

A Competition Policy Review, chaired by Professor Ian Harper, today released its draft report.

It rejected calls that Australia should amend competition policy and laws to emulate the formation of “national champions” like New Zealand dairy giant Fonterra.

The report said it was unclear whether allowing formation of Australian firms that were large enough to compete globally — was desirable from either an economic or consumer perspective

“While the pursuit of scale efficiencies is a desirable economic objective, it is less clear whether, and in what circumstances, suspending competition laws to allow the creation of national champions is desirable from either an economic or consumer perspective.” the report found.

It said submissions had noted that the best preparation for overseas competition was “not insulation from domestic competition but exposure to intense domestic competition”.

“Further, the purpose of the competition laws is to enhance consumer welfare through ensuring that Australian consumers can access competitively priced goods and services.

“Allowing mergers to create a national champion may benefit the shareholders of the merged businesses but could diminish the welfare of Australian consumers.”

Fonterra, the dominant dairy company in New Zealand, was formed from the 2001 merger of the two largest co-operatives, New Zealand Dairy Group and Kiwi Co-operative Dairies.

The review found important differences between the circumstances surrounding Fonterra’s formation and those applying in Australia.

“The New Zealand dairy market was highly regulated prior to the formation of Fonterra, including through the New Zealand Dairy Board having a legislated export monopoly,” it said.

“The merger to create Fonterra was not permitted under New Zealand’s competition laws but was instead facilitated through special legislation.”

“The legislation included provisions and obligations on Fonterra designed to provide for domestic competition and prevent harm to consumers and farmers as a result of the merger.”

The panel found there may be occasions where it was in the public interest to allow a particular merger in order to achieve efficient scale to compete globally, notwithstanding that the merger adversely affects competition in Australia.

Prof Harper said the recommendations in the draft report sought to “bring Australia’s competition policy up to date”.

“Australia’s competition policy needs to be fit for purpose, and updated for the economic opportunities and challenges Australia will face in coming decades,” he said.

“We face forces for change from increased globalisation, population ageing and new technologies, which are rapidly changing the way our markets operate.

After the close of consultation on November 17, the panel will consider its final recommendations, with a final report due by March next year.

Source: Weekly Times

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

Te puede interesar

Notas
Relacionadas