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Court dismisses Danone challenge to Chobani Canadian import permit

By Mark Astley , 02-Aug-2012

Chobani Greek-style yogurt manufacturer Agro-Farma Inc. is celebrating a major legal victory in Canada, after the country’s Federal Court dismissed a bid by rival firms to keep it off shelves.

Yogurt manufacturers Danone, Ultima Foods and AgroPur launched legal challenges in an effort to force a judicial review of a government decision to issue import permits that allowed Agro-Farma to import its Chobani Greek-style yogurt from the US.

In October 2011, the Minister for International Trade granted Agro-Farma two consecutive import permits: a three month Test Permit and an additional 12 month Bridging Permit to continue its supply of the Greater Toronto Area while a manufacturing facility was built.

The permits, which expire in February 2013, allowed Agro-Farma to produce Chobani using low-cost US milk for import into Canada, where milk prices are significantly higher.

The processors, which were referred to in court documents as the ‘Applicants’, claimed that the permits contravened Canadian dairy industry’s supply management regulations, which were designed to ensure milk producers obtain a fair return for their efforts.

Federal Court Justice Sandra Simpson dismissed the application “because the Applicants lack standing and, in the alternative, because the Decision is reasonable.”

Reasonable decision

“I have concluded that the Decision is reasonable because the evidence before the Minister suggested that the Chobani Permits would not harm Supply Management in the long term,” said Justice Simpson.

The applicants also voiced concerns about the potential competitive disadvantage they could suffer as a result of the permits.

“It is clear from this evidence that the Applicants were concerned about the competitive disadvantage they would suffer as they result of the Chobani Permits, but nevertheless positive about the prospects for sales of their own brands of Greek Yogurt.”

Justice Simpson added that despite their concerns, none of the applicants were able to present evidence of projected lost sales or market share.

“In the absence of such evidence, and given the evidence to the contrary, as discussed above, I conclude that the Chobani Permits will not cause the Applicants direct prejudice. At most, there may be a short period of disruption in which the Applicants must compete to develop market share as the market for Greek yogurt expands,” she said.

“Dangerous” permits

In addition to the application’s dismissal, Danone, AgroPur and Ultima Foods have been ordered to pay legal costs to Chobani.

Two applications were initially lodged with the Federal Court – one by Danone and the other by Ultima Foods and AgroPur. These were later consolidated by the court.

Ultima Foods, which manufactures and market Yoplait in Canada, and Island Farm yogurt-manufacturer AgroPur argued that the permits were “dangerous” and that processor sales would be harmed by the permits.

Danone’s position was that import restrictions were a fundamental aspect of the country’s supply management regulations.

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