The proposed freight-management company launched this year is being scrutinised by the Commerce Commission to ensure Kotahi Logistics will not introduce anti-competitive behaviour.
The company was launched by Fonterra and Silver Fern Farms, aimed at servicing about one-third of all containers leaving New Zealand.
Kotahi wanted to bring New Zealand's exporters and importers together to lift the performance of the country's supply chain, Fonterra trade and operations managing director Gary Romano said.
So far, Fonterra was the only customer of Kotahi. Silver Fern Farms was expected to become a customer once commission approval had been given.
In a report, the commission said Kotahi was to procure and manage the provision of containerised freight services on behalf of contracted exporters and importers. It would not provide service for bulk or non-containerised cargo. Nor would it get involved in the freight of products made or produced in New Zealand and destined for domestic markets.
Kotahi would contract with the various international shipping lines offering services to and from New Zealand ports. It would make and manage bookings with those shipping lines on behalf of its contracted exporters and importers.
In procuring services to transport containers to and from ports, Kotahi planned to contract with road transport firms, KiwiRail and coastal shipping companies.
However, Kotahi would initially outsource the transport function to Dairy Transport Logistics, a Fonterra subsidiary. Kotahi proposed to pool and co-ordinate the container freight volume of its contracted exporters and importers through few ports.
In doing so, it aimed to leverage scale to deliver better service and potentially achieve cost savings.
The commission outlined several preliminary issues it would consider, such as which markets were likely to be affected, the scale of Kotahi, whether it would lead to less competition, potential benefits and what might happen without Kotahi.
The commission would consider whether Kotahi's buying power could reduce prices to below competitive levels and whether it could facilitate collusion among its partners. Also to be considered was whether Kotahi could raise competitors' costs.
Fonterra had argued that the proposal would: lead to efficiencies in domestic freight and logistics; lower ocean freight costs through the introduction of progressively larger ships, brought about by demand consolidation and smoothing; reduced carbon emissions; more efficient land-side infrastructure investment. The commission said it needed to form a view as to what might happen without Kotahi.
Fonterra argued in its application that without Kotahi, port investment to enable the arrival of bigger ships would be delayed by three years or not even occur at all, with freight instead hubbed through Australia.
"Export earnings are New Zealand's bread and butter. Just last year the collective return was more than $40 billion. This is a great success story, but as the world changes there is a real risk we will be squeezed out.
"We are the most remote developed country in the world relative to international markets and the way we get our products to and from these markets is critical to continued success," Mr Romano said.
Exporters like Silver Fern Farms were facing a loss of international business if ocean freight services continued to decline, chief executive Keith Cooper said.
"Our ability to compete comes back to having efficient and reliable freight networks that offer quicker transit times and solid schedules. If we fail at this we put our exporting success story in serious jeopardy."
