MILK suppliers are warning of severe shortages this week as a result of what they call a misguided intervention in the market by the competition watchdog.
In late June the Commission for the Protection of Competition (CPC) ordered the Pancyprian Cattle Farmers' Organisation to supply Pittas Dairies with 65 tonnes of cow milk per day.
The Pancyprian Cattle Farmers' Organisation (POA) is a collective of the individual cattle farmers organised as a limited liability company.
The CPC issued the interim order - valid until the end of the year - after Pittas filed a complaint against the cattle farmers, who represent about 90 per cent of milk production on the island.
The cattle farmers say they have no choice but to comply with the order. But the quota imposed on them for supplying Pittas means they must reduce supplies to other dairy product companies, they claim.
Under the order which went into force last Friday, POA began giving Pittas 25 tonnes for the first five days, going up to 65 tonnes as of tomorrow.
POA chairman Savvas Evangelou yesterday blamed the watchdog's decision on any milk shortages that might arise.
Hitting back, CPC head Loukia Christodoulou accused the cattle farmers of seeking to create a problem out of nothing in a bid to use their market clout to put a chokehold on the watchdog.
Speaking to the state broadcaster, Christodoulou argued that the CPC never imposed any restrictions on the cattle farmers' supply methods.
"The CPC did not force POA to stop providing milk to pasteurisers," she said. In a loaded comment, she went on to ask why the cattle farmers had singled out milk supplies intended for pasteurisation and not for other dairy products.
Christodoulou pointed out also that the 65 tonnes are less than what Pittas used to get from the cattle farmers previously -- hinting that logically there should be no scarcity of milk now.
Yiannos Pittas, a manager at Pittas Dairy Industries, told the Mail that up until last December their company used to get some 80 tonnes of milk daily from POA.
In December the company decided to stop receiving milk from POA due to a dispute over their supply contract, which they said was unfair.
As a result, the company had since been operating at about 20 to 30 per cent capacity, Pittas said.
"We feel that, handled properly, there is now no reason why milk cannot be distributed smoothly to all dairy companies," he added.
The cattle farmers say Pittas' decision in December created excess capacity, as a result of which they had to dump some 3.5 million litres of milk between then and March this year.
The backdrop is a financial dispute between POA and Pittas; the cattle farmers say the company owes them payment of around three months' worth of milk supplies.
Some time after the dispute, Pittas had approached the cattle farmers asking for a new arrangement, but were turned down.
In its ruling, the competition watchdog had ordered the cattle farmers to supply Pittas with cow milk until such time as the legal dispute is resolved. The CPC also accepted Pittas' argument that being denied milk would devastate the company's operations.
The CPC further found that POA had abused its dominant market position through its refusal to supply Pittas.
According to the watchdog, the cattle farmers had squeezed out Pittas by engaging in 'vertical foreclosure', a type of anti-competitive behaviour. It said POA had moved into the cheese-making business by buying out Papouis Dairies Limited, a direct competitor of Pittas.
In order to cope, Pittas had in the meantime secured milk supplies from other dairy companies, who in turn bought them directly from POA. Moreover, this was well-known to the cattle farmers, the watchdog said.