The Independent Kiwifruit Growers Association (IKGA) has called for an independent enquiry into the regulations surrounding New Zealand's kiwifruit export regulations, as well as the operations and practices of marketer Zespri.

The comprehensive request was made following findings made by the National Business Review that Zespri’s internal documents showed it traded on consignment in China, and not on “buy-sell” contracts as the company claimed in court in Shanghai.

The IKGA release was also prompted by the investigation of the marketer by New Zealand’s Serious Fraud Office (SFO).

The association raised several key points it claimed warranted investigation, based on the fact that while Zespri is described as a State Trading Enterprise (STE) to the World Trade Organization (WTO) and has benefited from taxpayer-funded breeding programs, there is an imbalance of grower ownership and improvements could be made in transparency.

A key point, aside from the alleged inconsistencies in Zespri’s handling of the China customs fraud case, was the lack of tools and regulatory practices to prevent company directors from benefiting from important information that has not been made public.

"To the best of our knowledge, Zespri did not suspend trading in its shares during the period between 26^th December 2012 when Zespri first learned of the Chinese customs prosecution and the 11^th January 2013 when it was made public. An investigation of share trades during that period should be conducted," IKGA said.

"Zespri does not appear to have any mechanism for dealing with commercial advantages able to be leveraged by Directors and their associates in the trading of Zespri shares and within the kiwifruit industry generally from information about Zespri’s new kiwifruit varieties or the evolving situation with PSA before such information is available to the industry."

The release added that Zespri had refused a shareholder request to provide copies of expense account and credit card records for directors and senior managers on the grounds of confidentiality.

"We think that growers and shareholders of Zespri are entitled to know what business related expenditure their directors and managers claim when on Zespri business,” the release said.

The IKGA emphasized that 75% of Zespri shares are only owned by 25% of the country’s kiwifruit growers, claiming this threatened regulations, which had been formed on the premise of preventing monopoly, or “monopsony” buying power.

"Shareholdings by some growers in excess of their production and shareholders who no longer produce kiwifruit but still hold shares and get Zespri dividends further threaten the underlying concept of the regulations governing the kiwifruit industry that they will produce a greater good for the greatest number of growers.

"The opposite appears to have happened with captive growers funding super profits paid in the form of dividends to the privileged 25% as well as funding year on year the Zespri brand and other intellectual property rights that they do not own.

"KNZ (Kiwifruit New Zealand) has not once in its 13 year history been required to or offered to a supervising Minister any report on the efficacy of the Kiwifruit Export Regulations in doing what they say they are supposed to do which is to mitigate the effects of the monopoly granted under the regulations to Zespri."

The IKGA believes that Zespri’s "monopoly on information" is being used to inform Ministry for Primary Industries (MPI) policy and advice to Minister Nathan Guy with "little or no objective assessment".

"Answers given to questions raised with both MPI and Zespri seem to be written from the same song sheet when it should, in our view, have been obvious to officials that other views should have been sought."

The IKGA highlighted that the successful Hort16A kiwifruit variety was conducted with taxpayer funding, while a further NZ$35.7 million (US$29.6 million) has been put into a joint venture with Plant & Food Research to develop new kiwifruit varieties.

"A review is needed to determine if taxpayer funds should be privatised in this way and whether these varieties should be entrusted to Zespri which is a private company incorporated under the Companies Act, or held for the benefit of NZ Inc and all NZ Kiwifruit Growers," the IKGA said.

"Remember that public good funded apple varieties are now controlled by German company Baywa - arguably because of the ambitions of Trade Minister Tim Groser. The same could happen with public good funded kiwifruit varieties.”

On an international scale, IKGA also alleged that New Zealand’s kiwifruit export rules breached WTO rules and infringed on the intellectual property rights stipulated under the International Union for the Protection of New Varieties of Plants (UPOV).

"The regulations breach reciprocity principles in the way that they have been applied with respect to the commercialisation of new kiwifruit varieties.

"The operation of the regulations breaches specific reciprocity provisions of the UPOV treaty governing international Plant Variety Rights.

"While Zespri is free to plant its taxpayer subsidised new kiwifruit varieties offshore and commercialise those varieties for 12 month supply , foreign , and some NZ , kiwifruit plant breeders are not able to do the same in NZ and are therefore  planting in other Southern Hemisphere countries such as Chile and South Africa."

The release concluded that IKGA did not want to remove Zespri’s special point of entry (SPE) powers, but that it wanted to make them work better for growers.

"None of this would matter if kiwifruit growers were protected by the regulations and intellectual property rights were respected by the regulations.

"This is not a call to create a disastrous power vacuum by wholesale deregulation. It is, however, a call for responsible government."

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