The Korea Fair Trade Commission is investigating aspects of Zespri's arrangements with some of the big Korean supermarket chains, says Zespri spokesman David Courtney.

File photo.

Zespri briefed growers on the KFTC investigation during recent grower meetings held across the country in the second half of August.

Penalties, if Zespri is found to be in breach of Korean regulations, could include a fine of up to $US160,000.

'To put this in perspective, the KFTC conducts over 2000 of these sorts of inquiries a year,” says David.

'Zespri is assisting the KFTC in its inquiries, and we are awaiting their initial report.

'Once we have their report we'll have an opportunity to respond to any issues they identify.”

Zespri sells kiwifruit in 60 countries around the world and from time to time issues arise in various markets, says David.

Zespri's good reputation is important to us and the company seeks to act in accordance with local laws in all of the markets in which it trades.

'We are competing strongly with Chile in Korea, particularly given the cost advantage our Chilean competitors enjoy over New Zealand kiwifruit with an 11 per cent tariff compared to the 45 per cent tariff that applies on New Zealand kiwifruit.

'We are reluctant to comment further at this stage as the matter is subject to the KFTC investigation.”

Background

In March, Freshfruitportal.com reported that Zespri's strategy of exclusivity arrangements with Korean Supermarket chains was frustrating Chilean competitors.

Zespri obtained an exclusive deal with South Korean supermarket chain E-Mart in 2010 and this year with
another large South Korean supermarket chain Lotte Mart.

Industry insiders believe the Asian country's Tesco chains could be next on the list.

New Zealand-based Turners & Growers development manager Murray Malone accuses Zespri of attempting to block Chilean kiwifruit from the South Korean market.

'Recent moves to secure exclusive supply deals with two of Korea's largest supermarkets have shut out Chilean kiwifruit,” says Murray in March.

'This is not because of any issue with price or quality, but rather that Zespri is using a privileged position to tie up exclusive arrangements with customers and take a monopoly position in this market.

'These tactics harm Chilean kiwifruit growers and the wider Chilean economy – if Chilean growers allow such deals to go unchallenged, this could pose a serious threat to open and fair competition in the international kiwifruit industry.”

Freshfruitportal.com reports Alejandro García Huidobro from Chilean kiwifruit company Prize, saying Zespri's strategy is ‘logical'.

'It's part of a commercial strategy and we all know the pressure Zespri puts on its clients. It is like when you go to a restaurant and you ask for Coca Cola but they only have Pepsi, because they signed an exclusivity deal with the brands of the bottler,” says Alejandro.

'Supermarkets measure their sales by rotation and margin per square meter. Today, the rotation of Zespri kiwifruit in Korea is higher than the rotation of Chilean kiwifruit, and the unit price too.

'If the rotation were the same in supermarkets it would be more attractive to sell Zespri kiwifruit because of the margin the supermarkets are getting. So that gives some logic to what is happening.”

The Chilean Kiwifruit Committee was in March expected to take action with a formal complaint.