Dairy Industry Restructuring Act 2001 review

A comprehensive review of the Dairy Industry Restructuring Act 2001 (DIRA) and its impact on the dairy industry was announced in December 2017. Find out about the review and how you can contribute.

Overview

The Dairy Industry Restructuring Act 2001 (DIRA) promotes the efficient operation of dairy markets.

The DIRA is a significant driver of the dairy industry's performance. When the DIRA was introduced in 2001, it transformed the dairy industry through the creation of Fonterra. A lot has changed since then. In 2015/16 the Commerce Commission reviewed the state of competition in the dairy industry. We will build on that analysis as the review now takes a more strategic focus and looks at the effectiveness and impact of the DIRA across a range of areas. This will include incentives or disincentives it might create for the dairy industry to transition to:

  • higher-value dairy production and dairy processing that global consumers seek for a premium
  • more sustainable environmental practices on and off-farm.

Terms of reference

On 9 May 2018, the Government released the terms of reference for the review. The terms of reference set out the objectives, scope, approach, and process for the review. They also provide background information on the original purpose and form of the DIRA regulatory regime.

The main focus of the review is on the DIRA regulatory settings that govern the structure, conduct and performance of the New Zealand dairy industry as a whole. A key part of the review is to consider the impact of the DIRA regulatory settings on the environmental performance of the dairy industry (both at the on-farm production and off-farm processing levels of the New Zealand-based dairy supply chain). The DIRA review and its impact on the environmental performance of the dairy industry forms a part of the government's wider package of work aimed at addressing climate change, biodiversity, water quality, and sustainable land use.

Some settings are outside the scope of the review 

These industry and regulatory settings are outside the scope of the review:

  • Consideration of individual dairy farms' financial, environmental, and animal health and welfare performance. This is being considered as part of MPI's Farm Systems Change initiative designed to help close the gap between top-performing dairy farms and the rest of the dairy farming sector.
  • Performance and regulatory settings of the dairy herd improvement industry. This issue will be subject to a separate policy review process.
  • International trade and market access rules for New Zealand dairy products. The Ministry of Foreign Affairs and Trade is responsible for trade policy, informed by the development of a New Progressive and Inclusive Trade Agenda.
  • The legislative provisions around the allocation of quota access in overseas markets. There is currently no indication that these provisions would benefit from a review.

Find out more

Next steps

We're at Stage 1, where we're determining the facts and building evidence. We're holding initial stakeholder meetings, analysing issues and identifying options.

Later in 2018 and early 2019, Stage 2 considers options for change. This involves the development and release of a discussion document for public consultation, analysis of submissions and reporting to the Government with the overall findings of the review and policy recommendations for regulatory change.

We'll be seeking feedback from the dairy industry, farmers and the public during the formal consultation, which will be available on this website. 

Key stages of the review processIndicative timing

Public release of the terms of reference

May 2018
Stage 1: Determining facts and building evidence 
Issues identification:
  • Initial stakeholder meetings
  • Analysis of issues and identification of options
May to August 2018  
Stage 2: Considering options for change 

Options identification:

  • Development of consultation document
  • Release of the consultation document
  • Public consultation
  • Analysis of submissions
  • Regulatory Impact Analysis
September to December 2018    

Final report to Government:

  • Overall findings of the review
  • Policy recommendations for regulatory change
Early 2019  
Stage 3: Implementation of review's findings 

Legislative change process:

  • Drafting of the Bill
  • Parliamentary processes
During 2019  

Background

In 2001, the DIRA allowed the creation of Fonterra through a merger between the 2 largest dairy cooperatives of the time and the New Zealand Dairy Board. The DIRA provides a framework to regulate the activities of Fonterra as a dominant dairy processor, including monitoring of its farm gate milk price setting processes. It also provides for the dairy export quota management system and regulates herd testing and the dairy core database.

In 2015/16, as a statutory requirement, the Commerce Commission did a review of the state of competition in the dairy industry. Further to recommendations in the report, the previous Government proposed changes related to competition in the sector. However, these were not considered by Parliament and were therefore not implemented.

On 19 December 2017, the Government announced a comprehensive review of the DIRA and its impact on the dairy industry.

In February 2018, the Dairy Industry Restructuring Amendment Bill (No 2) was introduced to prevent the DIRA's efficiency and contestability provisions from expiring in the South Island to allow time for a comprehensive review.

Staying in touch

If you have thoughts or comments on the review, or you would like to get DIRA updates, email dira@mpi.govt.nz

 

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