Price-fixing fine adds to Fonterra trouble

WELLINGTON -- New Zealand dairy giant Fonterra revealed Wednesday that it had been fined 4.47 million yuan ($728, 975 or NZ$922,663) by Chinese authorities for its involvement in price fixing of consumer dairy products.

The announcement came as Fonterra chief executive Theo Spierings apologized to the New Zealand public for the botulism scare that has damaged the country's international standing and panicked parents at home and abroad as infant formula is removed from supermarket shelves.

A statement from the farmer-owned cooperative said the fine had come from China's National Development and Reform Commission (NDRC) after a review of pricing practices in the Chinese mainland.

"Fonterra has been co-operating fully and openly with the NDRC throughout this process. We accept the NDRC's findings and we believe the investigation leaves us with a much clearer understanding of expectations around implementing pricing policies which is useful as we progress our future business plans," Kelvin Wickham, president of Fonterra greater China and India, said in the statement.

"We understand that a number of companies in the dairy industry were fined, with Fonterra's fine being in the lowest range."

As a consequence of the investigation, Fonterra would provide additional training to its sales teams and review distributor contracts to ensure clarity around how pricing policies are implemented through the distribution chain.

In Auckland, Spierings told a press conference that all remaining contaminated product was now in warehouses and there was little or no risk to any consumers, Radio New Zealand reported.

The company announced Saturday that 38 tons of its whey protein used by other manufacturers, including baby formula manufacturer Nutricia, had been contaminated with a bacterium that can cause botulism in May 2012.

Testing confirmed the contamination on July 31 this year, but Fonterra only told the Ministry for Primary Industries on August 3.

Spierings acknowledged that when Fonterra announced the contamination, it did not have all of the information at the time, and he apologized for the anxiety and discomfort caused to the public, said the report.

Spierings traveled to China over the weekend to apologize to customers there and to speak to authorities about the situation.

Economic Development Minister Steven Joyce said Wednesday that a lack of clear communication about which products were contaminated and which were being recalled added to the confusion and led to ministers losing confidence in Fonterra, said the report.

Joyce said an inquiry was needed to establish what had happened.

Global dairy prices dropped slightly Wednesday in Fonterra's first auction since the contamination scandal was revealed.

The company's Global Dairy Trade Weighted Index, which covers a range of 30 products, fell 2.4 percent to an average selling price of $4,847 per ton.

The fall was the first in two months, but prices were still 73 percent above the same period a year ago, Radio New Zealand reported.

Trade Minister Tim Groser told Radio New Zealand Fonterra continued to enjoy a price premium over producers from other countries.