The New Zealand Kiwifruit Board have been ordered to re-hear an application by two Te Puke kiwifruit exporters and marketers to sell kiwifruit in Austria and China.

The board turned down collaborative marketing applications by Splice Fruit Ltd and Seeka Kiwifruit Industries Ltd, and removed a former right of appeal.

Splice sought approval for a collaborative marketing arrangement involving the export of 180,000 trays of green organic Class 1, kiwifruit to Austria.

Seeka sought approval for a collaborative marketing arrangement involving the export of 400,000 trays of green Class 1, kiwifruit to Hainan Island, in China, and for the export of 120,000 trays of green Class 1, kiwifruit to Xinjiang province, in China.

The applications were all refused on December 22, 2015, with reasons given in writing on January 21, 2016. The board withdrew a previous appeal process on November 23, on the advice of senior counsel it was unlawful and invalid.

Justice Heath says it wasn't unlawful.

'With respect, I consider that the Queen's Counsel from whom the Board sought advice focussed inappropriately on the question whether the Board could set up an appellate procedure akin to that which might otherwise have been included in the Act or Regulations.”

He says it was open to the Board to regulate its own procedure by incorporating a review process.

He didn't criticise the Board for removing the appeal process as it was relying on advice from a senior Queen's Counsel.

The hearing was expedited to enable the applications for the judicial review and the re-hearings to take place before the kiwifruit export season begins.

Each application for judicial review is granted:

Splice applied to sell kiwifruit in Austria under the name of 'Ja! Naturlich”

There have been previous collaborative efforts between Zespri and Splice. The Europe Committee was conscious of the potential for the proposal to impact adversely on the 'ZESPRI” brand and premium returns to New Zealand suppliers that could be received through it.

Seeka's application in respect of the Hainan Island proposal, was the subject of a review of economic evidence by The China Committee, which was concerned about problems that might arise with the ability of the intended market to deal with the volumes of kiwifruit Seeka intended to supply.

And that unsold Hainan fruit would ‘leak' onto the mainland, and possibly disrupt Zespri's mainland strategy.

In respect of Xinjiang province, the China Committee members were concerned with an analysis of the economic issues. But also considered problems involved in getting the kiwifruit to the relevant destination port, Urumqi, and the likelihood of 'leakage” if the proposal were to go ahead.

The China Committee was concerned about the possibility of a parallel supply of New Zealand kiwifruit developing in a manner detrimental to the goals of increasing sales and maximising returns in China.

(The New Zealand Kiwifruit Board was first defendant, Zespri GRoup Ltd the second defendant.

The two entities were created in 1999 when the Government of the day decided to restructure the kiwifruit industry. One of the aims of the restructuring was to separate out the functions undertaken by the old New Zealand Kiwifruit Marketing Board (the old Board), so that:

(a) Its commercial business was assumed by a limited liability company to be established for that purpose, Zespri Group Ltd (Zespri). Zespri was to be subject to generic laws governing the governance and management of all companies. Its shares were to be issued to producers, and tradable among them.

(b) Regulatory functions were to be transferred to a newly established New Zealand Kiwifruit Board (the Board). Those functions were designed to monitor and enforce various provisions designed to minimise the risk that Zespri would abuse its privileged position in the market, and to safeguard the overall economic interests of all kiwifruit suppliers.

A monopsony was created in favour of Zespri, so that it is the sole entity that is entitled to export kiwifruit to anywhere other than Australia. A number of mechanisms were put in place to minimise the possibility of abuse of Zespri's market power, and to ensure that increasing the overall wealth of kiwifruit suppliers remained the primary objective.)