By Tom Westbrook
SYDNEY, May 14 (Reuters) - The world's largest dairy exporter, Fonterra Co-operative Group FXG.NZ , and Australia's biggest dairy producer, Murray Goulburn Co-operative Co Ltd MGC.AX , are being investigated in Australia over cuts to the price paid to farmers.
Australian dairy farmers were surprised and angered when both firms reduced their farm gate prices from A$5.60 ($4.07) per kg of dairy solids to between A$4.75 and A$5.00 per kg in the past month. investigation, by the Australian Competition and Consumer Commission, will examine the timing and notice of the cuts, its chairman, Rod Sims, said in comments emailed to Reuters and also published by The Australian newspaper.
"The ACCC will consider whether the changes have involved misleading conduct or whether there are elements of unconscionable conduct," he said.
"While linked to contractual arrangements, the ACCC is interested in the timing and notice of the cuts, the period in which farmers have been given to consider their options and all of this against the backdrop of supply arrangements that place a lot of risk on farmers."
Global dairy prices have fallen around 60 percent since early 2014, mainly due to weaker demand from China after it stockpiled milk powder, and most analysts expect milk prices to stay low for some time.
A Fonterra spokeswoman said the company has been assisting the ACCC with its enquires.
"Fonterra takes its legal and regulatory obligations seriously and is committed to fully complying with them," she said in an email.
A Murray Goulburn spokeswoman said the company would cooperate with investigators.
Industry group Australian Dairy Farmers President Simone Jolliffe said farmers were "absolutely reeling" from the price cuts.
"The farmers are angry and frustrated, these cuts came late in the season without any notice," she said.
"The regulators exist for a reason and to see the regulators seeking to take into account the concerns of farmers is a positive step."
A finding of misleading or unconscionable conduct by the ACCC could expose Fonterra and Murray Goulburn to fines of up to A$1.1 million.
($1 = 1.3763 Australian dollars)