A combine harvests a cereal crop

Legal issues with dairy industry’s woes

The current crisis in the dairy industry with a return to pricing lower than the cost of production, does not initially appear to have much to do with the law.

However, on closer examination there are three legal issues that emerge from even the most cursory examination of the industry’s woes.

First, the competition policy which has been adopted in the EU and the UK has allowed a situation to arise where the milk producers are price takers rather than makers. In New Zealand the competition authorities allow a much higher percentage of the market share to one farmer controlled wholesaler. This allows the wholesale price of milk to be robustly defended against super markets and as the wholesaler is a farmer controlled cooperative more money is thus passed on to the primary producer. What is odd is that this does not seem to engender inefficiency as was the criticism of the old Milk Marketing Board. It might be possible politically to wrest control of this policy from the EU and allow many fewer milk wholesalers to exist in future in the UK, thus adding to their market power.

Secondly, milk contracts are usually in my experience one sided. Most of the terms of such a contract deal with the price fixing mechanisms. It is not impossible for central government to insist on a much long periods in such contracts before price cuts take effect and as with Petrol prices for price increases to be phased in sooner.

Finally, the consumer credit industry thirty years ago suffered from a poor image with market power in the hand of the lenders. Now there is so much protective legislation in place in favour of the consumer that the banks and credit companies have been tied up in knots. It only takes political will to do the same to dairy processors and super markets in respect of the milk industry…