PROJECTS

Review of Market Competition for Livestock Improvement Services, New Zealand

The problem

New Zealand’s Livestock Improvement Corporation (LIC) owns a database on the genetics, productivity and ancestry of almost every cow in New Zealand’s dairy cow herd, going back generations. LIC uses this database to assist its farmer-members with precise guidance on herd-improvement and artificial breeding. Rival companies alleged that LIC’s database gave it a dominant position in the market, and that the fees it charged competing breeding companies for access to the database were deterring competition in the artificial breeding market. The Commerce Commission, New Zealand’s competition authority, was considering enforcement action.

How we helped

Castalia advised that charges for use of the database could only be considered anti-competitive if they infringed the Efficient Component Pricing Rule (ECPR). We calculated what charges for access would be under the ECPR, and found that LIC’s actual charges were lower than those that would be justified under this Rule. We also examined data on the market share of LIC and its rivals in the artificial breeding market, finding that the rivals were gaining market share.

Impact

Castalia’s report concluded that other cattle improvement and artificial breeding companies were being charged less than 75 percent of the ECPR price and had increased their market share. This meant that LIC pricing did not deter competition. The Commerce Commission accepted our conclusion and took no further action.