UPDATED: Fonterra fined $300,000 over last year’s whey protein incident

Fonterra Cooperative Group, the country's biggest company, was fined $300,000 for breaches of the Animal Products Act during last year's whey protein concentrate incident.

Judge Peter Hobbs fined Fonterra $60,000 for three separate charges and $120,000 for a fourth charge in the Wellington District Court. The judge took a starting point of $375,000, before mitigating factors including Fonterra's early guilty plea and steps it took to address the issue, though he lifted the penalty to reflect the company's size.

"There's no doubt the flawed reworking process and its fall-out had wide ramifications," Judge Hobbs said. "I accept, however, the offending resulted from careless failure to follow proper procedure rather than a deliberate or reckless plan - things could have and should have been done better."

The dairy exporter faced a maximum penalty of $500,000 for not processing the whey protein concentrate in line with its approved risk management programme, exporting dairy products that didn't meet food safety standards, failing to notify AssueQuality of its concerns, and failing to inform the Ministry for Primary Industries it had exported product not fit for purpose.

Grant Burston, counsel for MPI, sought a starting point of $375,000, with mitigating factors and an uplift to account for Fonterra's size resulting in range of $300,000 and $350,000. Counsel for Fonterra Adam Ross said his client would accept the decision of the court.

Auckland-based Fonterra released results of an operational review into the incident in September, which showed the contamination had occurred at its Hautapu plant in the Waikato back in May 2012 after workers became concerned a piece of plastic had fallen into a drier.

Rather than downgrade the product it was decided to reprocess the powder, using a non-standard transfer pipe that was thought to be the source of the contamination. The incident led to a global recall of the contaminated product.

That initial incident was compounded by "a number of un-related events in an unforeseen sequence," chief executive Theo Spierings said at the time. The contamination was ultimately found to be a harmless strain of bacteria.

Fonterra reached commercial settlements with seven of the eight customers affected by the food scare, and is still facing a civil claim by France's Danone, the parent of infant formula manufacturer Nutricia.

Ultimately, the contamination scare did little to dent global demand for dairy products, which have driven a surge in New Zealand's export receipts and helped send the terms of trade to a 40-year high.

(BusinessDesk)