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Canada Court Allows Chobani? Greek Yogurt?s Importation Into Canada PDF Print E-mail
2012-12-12 23:30:58

Image After a spirited fight, on June 21, 2012, the Federal Court of Canada ("Court") upheld import permits issued to Agro-Farma Inc. ("Agro"), the maker of the top-selling U.S. brand, Chobani® Greek yogurt. Although Canadian processors strongly protested the grant of the permit, arguing that they would be at a competitive disadvantage and the move would contravene the dairy industry's supply management system, the Court found differently, looking through a broader lens.

Greek yogurt has exploded in popularity over the past year, with Canadian sales increasing from 1% to 6% of the Canadian yogurt market. With sales growing at such a fast pace, it is no wonder that Agro, the maker of top-selling US brand Chobani® Greek yogurt, wanted a piece of the Canadian market. In 2011, Agro was granted a one-year test market import permit from Canada's Minister of International Trade whereby it could temporarily import and sell its Greek-style yogurt in the Greater Toronto Area.

CANADIAN PROCESSORS SAY NO

Major Canadian yogurt processors opposed the granting of the permit to Agro on the basis that it contravened the supply management system regulating the Canadian dairy industry. The supply management system, through control mechanisms on domestic pricing, the volume of milk produced and the volume of imported dairy products, aims to help milk and cream producers obtain a fair return for their labour and investment.

Canadian processers argued that their sales would be harmed by Agro's import permit and would result in a reduced demand for Canadian milk. Given that the US government pays direct subsidies to dairy farmers, the import permits would allow Agro to sell Chobani® made with much less expensive US milk. As the Canadian processors explained, this would mean that even accounting for the cost of importing the yogurt from the US, Agro's Chobani® sales would be more profitable than sales made by Canadian processors, who are required to use more expensive Canadian milk.

COURT SAW A ROSIER PICTURE

In deciding to dismiss the Canadian processors' application for judicial review, the Court considered whether the issuance of the import permit to Agro would harm the supply management system in the long term in light of the following factors: geographic scope and duration of the import permit and the market conditions for the relevant products.

The Court acknowledged that while the import permit might mean greater competition for Canadian yogurt processors in the short term, which could potentially impact their future market share gains, there was no evidence that the permit would have a long term negative impact on supply management. The Court noted, among other things, that sales of the Chobani® Greek yogurt would be limited to the Greater Toronto Area and imports were only possible for 15 months. Further, although the import permit might result in a short term reduction in domestic yogurt sales, the Court anticipated an increase in demand for milk in the long run which would have a positive impact on supply management.

Ultimately the Court found that the Minister of International Trade made a reasonable decision in extending the temporary permit to Agro, and therefore dismissed the challenge to block the Chobani® Greek yogurt importation.

For case details please see: Ultima Foods Inc. v. Canada (Attorney General), 2012 FC 799.

Given that the US government pays direct subsidies to dairy farmers, the import permits would allow Agro to sell Chobani® made with much less expensive US milk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. (http://www.mondaq.com
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