Legislative Protections Afforded, Legislative Protections Achieved

The announcement by Fonterra Australia that it has settled its class action with over 350 dairy farmers closes a period of uncertainty and distress for many impacted.

The payment by Fonterra of $25M, without admission of liability, to be paid to those impacted by their actions in 2016, will provide small comfort to those who lost far more at that time, including the loss of trust in Fonterra as their processor.

Yet positives did arise from the ashes of the claw back of the farmer's milk price by Fonterra and the then Murray Goulburn.

The Mandatory Dairy Code of Conduct was introduced as a result of the lobbying of dairy industry bodies.

It has proved to be vital in helping to restore trust, openness and transparency between dairy farmers and their processors.

The Code will be celebrating its 3rd anniversary in January 2023, and it has grown organically over the past years, with oversight by the ACCC.

Since its commencement, it has continued to provide a strong platform for dialogue to achieve oversight of the milk supply agreements that were provided by processors to their suppliers.

The Code required that milk supply agreements had to be negotiated in good faith, be drafted in plain English and prohibited retrospective clawbacks as evidenced in 2016 amongst other safeguards.

Many farms are family owned and are small businesses. They are therefore afforded legislative protections against those who may be considered more powerful in their dealings.

The federal government has recently enacted unfair contracts protections for small businesses, which passed federal parliament on 27 October. The legislation is intended to ensure more competition and better prices.

By their very nature, many family-owned farms are small businesses.

The definition of a small business has been extended to be businesses with less than 100 people (from 20 people) or less than $10M turnover in the last income year.

Penalties have also been substantially increased for unfair contract terms that are found by the courts to be included in standard form contracts.

The Act provides businesses 12 months to review and amend their standard form contracts to comply with the legislation otherwise higher penalties can be imposed by the court.

Under the Competition and Consumer Act, penalties for businesses may be, whichever is the greater:

•             up to a maximum of $50M; or

•             three times the value of the "reasonably attributable" benefit obtained from the conduct, if the court can determine such a figure, otherwise if the benefit cannot be determined, 30% of adjusted turnover during the breach period.

For an individual, the maximum penalty will increase from $500,000 to $2.5M.

These changes have been supported by agricultural bodies such as the NFF and the ACCC.

As like the Mandatory Dairy Code, these changes will need to be monitored and amended as required to ensure that they provide the best available protection to small businesses.

President of NFF Fiona Simson has correctly identified that further work will be "needed to be done to ensure competitive markets in our food supply chains."

"The unfair contract terms laws are vital to protect consumers and small businesses against terms in these contracts that take advantage of this imbalance in bargaining power. We are pleased that these laws have been strengthened," ACCC Chair Gina Cass-Gottlieb said.

Where market power is abused by those in stronger bargaining positions, advocacy bodies like eastAUSmilk will highlight these abuses to government to seek appropriate redress.

We will watch closely as these changes come into effect and eastAUSmilk will lobby for further changes, if needed, to ensure dairy farms remain sustainable within the dairy value-chain in their relationship with processors and supermarkets.

Shaughn Morgan, Co-CEO eastAUSmilk