New Zealand's Independent Kiwifruit Growers' Association (IKGA) has called on Zespri to provide more detailed answers to concerns over its US$375,000 fine from the Korean Fair Trade Commission over anti-competitive practices.

In a letter addressed to Zespri chairman John Loughlin, IKGA said it was 'greatly disturbed' by the fine for 'Chilean Kiwifruit Sales Obstruction', demanding answers about where the money will come from.

"Why is Zespri telling growers and media that grower money is not being used to pay this large fine, when the money is coming from the "corporate fund", paid for by the commission Zespri takes from every tray of our kiwifruit?" IKGA said in the letter, signed by grower liason Ted Meade.

"Please advise the amount of money held in the 'corporate fund' and exactly how many cents per tray of kiwifruit Zespri takes from growers in 'commission' to fund this account."

In the letter IKGA also enquired as to whether Zespri has conducted similar practices in Japan and Europe that could warrant anti-competition lawsuits, while it also asked for a more elaborate response with details about the detainment of import agent Liu Xiongjie in China.

Click here to read IKGA's full letter to Zespri.

Details of Fair Trade Commission ruling

The Korean Fair Trade Commission's report ruled that Zespri "coordinated negotiations with Shingsae Food and made sure they as well as E-Mart did not handle/sell Chilean kiwifruits including ENZA Green in 2010".

The report highlighted that E-Mart sold KRW1.6 billion (US$1.4 million) worth of Chilean kiwifruit in 2009, but Zespri's arrangement meant the supermarket did not sell any Chilean kiwifruit in 2010.

The commission said another chain Lotte Mart made an agreement with Zespri under the condition of banning the handling or sale of Chilean kiwifruit in April, 2011.

Zespri was also negotiating with Home Plus for a similar agreement, but the chain had not yet made a decision.

The commission ruled Zespri's offenses had blocked Chilean kiwifruit from 55% of the distribution channels of large discount stores. After Chilean fruit was blocked from E-Mart shelves in 2010, Zespri green kiwifruit prices rose by 13%.

It was found there was little change in prices for Zespri green kiwifruit in stores that still sold Chilean kiwifruit.

"Since the sale of Chilean kiwifruits becomes impossible in large discount stores in E-Mart, Zespri would be able to maintain a monopolistic position as a brand kiwifruit in large discount stores," the report said.

"Had Chilean brand kiwifruits been continuously sold in E-Mart, the No.1 large discount store, since 2009, a domino effect would have been expected, i.e. the sale of Chilean kiwifruits would spread to other large discount stores.

"In addition, such offenses placed a direct restriction on the rights of customers to purchase cheaper Chilean kiwifruits."

The report took note that Zespri's actions were partly motivated by reduced tariffs for Chilean kiwifruit which are set to drop to zero by 2014, while New Zealand's tariffs remain at 45%.

In 2010, Zespri accounted for 67.2% of the South Korean market, 26.9% was from domestic production and 5.9% came from Chile.

Click here to view the Korean Fair Trade Commission report.

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Photo: iFood

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