The Government is considering changes to dairy industry rules which could make Fonterra disclose more information about the way it sets the price of milk.
Primary Industries Minister David Carter says a review of the regulations, which followed widespread concern last year about the high price of milk, has come up with a set of recommendations.
They include introducing an annual milk price monitoring regime undertaken by the Commerce Commission and requiring dairy co-operative Fonterra to publicly disclose information about milk price settings.
It also recommends an increase in the amount of raw milk provided to Fonterra's competitors to about five percent of its supply.
Mr Carter says consultations with the industry have started and he's going to produce a draft bill.
"The review found that although Fonterra's approach is consistent with that expected in a competitive market, lack of transparency remains an issue," he said on Tuesday.
"The amendments will result in a regulatory regime that promotes a more transparent and efficient dairy market."
But Fonterra says the proposed changes won't work and were a backward step.
"The proposed changes will see windfall profits head straight into the pockets of increasingly foreign-owned dairy companies and will hinder, rather than help, New Zealanders get access to affordable milk," chairman Sir Henry van der Heyden said.
"Our Fonterra farmers are angry that their 1500 submissions have been ignored and that they are being press-ganged into this great milk subsidy that is poorly targeted and stands to miss the people it's meant to help - Kiwi families.
"International competitors will be laughing at New Zealand, and it will be all the way to the bank," he said.
The Ministry of Agriculture carried out the review.
NZN