Farmers raise competition concerns at industry roundtable
Farmer representatives from across Australia convened in Canberra yesterday for a roundtable hosted by the National Farmers’ Federation (NFF) with Assistant Minister for Competition Andrew Leigh.
The meeting came as the Federal Government continues its review of competition policy, and as supermarket pricing comes under increased scrutiny with a Senate inquiry set to commence in 2024.
NFF Chief Executive Tony Mahar said it was critical that the concerns of farmers were heard and acted on by the Albanese Government.
“Our members are increasingly frustrated by the imbalance in market power between small family farming businesses, and the large corporates that dominate Australia’s food supply chain,” Mr Mahar said.
“Yesterday’s roundtable was an opportunity for industry representatives to put their concerns directly to Government and hopefully get some momentum behind long overdue reform of Australia’s competition settings.
“What we heard is farmers are fed up with the lack of transparency, and worried about the continued consolidation of our supply chains.
“We’re encouraged by the Government’s response to these issues so far, but we know reform is hard, so we need to make sure we’re seeing meaningful changes to give farmers a fair go.”
Issues and policy suggestions highlighted at yesterday’s Roundtable include:
The need for significant competition reform to ensure a sustainable and profitable food production sector in Australia.
Market price transparency
A lack of market price transparency is having a significant impact across all agricultural industries, but particularly in horticulture.
Recent findings by AUSVEG suggest 34% of farmers surveyed nationally were considering exiting the industry within 12 months.
Farmers need to understand how the price they are paid is determined.
Specific issues include: a lack of transparency over factors which determine price, lack of contracts, lack of enforceability and accountability to contractual obligations, unfair trading practices and deceptive conduct.
The group discussed the utility of mandatory price disclosures and price reporting platforms.
Greater resourcing for the ACCC to ensure it has the capacity and powers to effectively monitor and proactively investigate highly concentrated markets with the potential to harm consumers and businesses.
Greenwashing and prescriptive reporting is already apparent in domestic supply chains. Farmers and industries are being proactive in this space, but with little to no reward.
The onus on farmers to provide additional data is significant – for example farmers in horticulture (banana growers) already report spending an additional $6,000-$8,000 on compliance reporting and audit processes with no increase in prices to reflect the additional cost.
Consumers and farmers alike need evidence to support the integrity, legitimacy, quality of prescriptive requirements imposed in the name of sustainability. This helps to ensure transparency, understanding and ultimately truth in labelling for consumers.
Industry Codes of Conduct are valuable but need teeth.
The Food and Grocery Code must be made mandatory to ensure wholesalers and retailers are held accountable and treat farmers fairly.
Fear of commercial retribution continues to be a significant barrier to farmers seeking justice and calling out unfair trading practices.
Agency Agreements - the roundtable discussed the growing use of agency agreements as a legal form of retail price maintenance and called for this to be outlawed
National Farmers Federation, 7 December 2023
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ACCC announces alterations to dairy code of conduct guidance
Australia’s dairy code of conduct guidance has been finetuned by the competition watchdog for its third test at the farmgate.
The Australian Competition and Consumer Commission today announced an updated guidance to the mandatory dairy code, which came into effect in July 2020.
Further detail has been provided by the ACCC on how processors need to publish their milk supply agreements and when they can terminate an agreement with a farmer.
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Source: Alex Sinnott, 28 April 2023
ACCC - Dairy Farmers Milk Co-Operative Limited – Final Determination
The ACCC has decided to grant re-authorisation to enable Dairy Farmers Milk Co-operative Limited (the Co-operative) and its dairy farmer members to make and give effect to back-to-back milk purchasing policies and milk pricing arrangements with Bega. This conduct has been authorised in some form since 22 October 2008.
Broadly, the back-to-back arrangements mean that the pricing and purchasing arrangements between the Co-operative and its members are the same as those that apply to the purchase of milk between Bega and the Co-operative.
To read the documents in full click on links below:
ACCC to Interested Parties re Final Determination
Final Determination to DFMC
ACCC makes a move Dairy Code compliance
The supply chains in which farmers and the broader agribusiness community operate have experienced significant challenges over the past 30 years, particularly around 'deregulation'.
These include unequal bargaining power between processors and farmers, and systemic transparency issues in contract and pricing practices, and have now culminated in the Australian Competition and Consumer Commission implementing the Dairy Industry Code of Conduct, which came into effect on January 1, 2020.
The Code regulates the conduct of farmers and milk processors in their dealings with one another and applies to retailers to the extent that they purchase milk directly from farmers. Under the Code, all processors that intend to buy milk from farmers in the next financial year are required to publish standard form milk supply agreements by the publication deadline, which is 2pm (ACT time) on June 1 each year.
Additionally, an MSA must not permit a processor to unilaterally terminate an MSA, except where the farmer has committed a 'material breach' of the agreement to ensure that farmers are not treated unfairly.
The ACCC considers has signalled a focus on ensuring compliance as part of its 2022-23 Compliance and Enforcement Policy and Priorities. Farmers will be pleased to hear these weren't empty words following the conclusion of the first court proceedings instituted under the Code since it came into effect.
In the case of Australian Competition and Consumer Commission v Lactalis Australia Pty Ltd [2022] FCA 1087, the court found that Lactalis Australia Pty Ltd breached the Code in relation to the 2020-2021 milk season when it failed to publish its MSAs on its website by the Code's deadline of 2pm on June 1, 2020.
The court also found that Lactalis breached the Code by publishing and entering into agreements that allowed them to unilaterally terminate the agreement in circumstances that did not amount to a material breach.
Farmers should feel encouraged to report potential non-compliance with the Code to the ACCC.
Kylie Wilson and Geoff Farnsworth are partners, and Kayla Plunkett is a graduate at Holding Redlich.
Source: Kylie Wilson, Geoff Farnsworth and Kayla Plunkett, Farmonline National, 29 October 2022
Media Release: Lactalis Australia found to have breached Dairy Code of Conduct
The Federal Court has found Lactalis Australia Pty Ltd (Lactalis) breached the Dairy Code of Conduct by failing to meet some of its obligations in relation to the 2020-21 milk season, in court proceedings brought by the ACCC.
The Code commenced in 2020 to address systemic transparency issues and bargaining power imbalances between dairy farmers and processors.
“This is an important case for the ACCC as these are the first proceedings we have instituted under the Dairy Code of Conduct, and the decision is a win for dairy farmers who generally have limited bargaining power in their dealings with much larger processors,” ACCC Deputy Chair Mick Keogh said.
The Court found that Lactalis breached the Code when it failed to publish its milk supply agreements on its website by the Code’s deadline of 2pm on 1 June 2020, and instead required dairy farmers to sign-up through a web portal to receive them by email.
The Court also found that Lactalis breached the Code by publishing and entering into agreements that allowed them to unilaterally terminate the agreement in circumstances that did not amount to a material breach. In particular, Lactalis was permitted to unilaterally terminate the agreement when, in their opinion, the farmer had engaged in “public denigration” of processors, key customers or other stakeholders.
However, the Court dismissed the ACCC’s allegation that Lactalis had failed to publish genuine non-exclusive milk supply agreements by requiring farmers to supply a minimum of 90 per cent of their monthly milk production, which the ACCC alleged would have the effect of prohibiting most farmers from supplying milk to another processor. The Court found that Lactalis’ subsequent publication of this agreement met the Code’s requirement for the publication of a non-exclusive agreement.
The Court also found that Lactalis did not fail to meet the Code’s “single document” requirement, which is intended to provide a single source of farmers’ obligations, to provide farmers with certainty regarding the content of their agreement.
“Farmers need to have access to timely information when making decisions about which processor to supply milk to,” Mr Keogh said.
“In breaching the Code’s requirement to publish its milk supply agreements by the deadline, Lactalis made it harder for farmers to compare milk prices and contract terms across different processors.”
“This case should serve as a reminder to all dairy processors that failure to comply with the Code may result in ACCC enforcement action, including court proceedings, with serious consequences,” Mr Keogh said.
A hearing on relief, including penalties, will be held at a later date.
Background
Lactalis is one of Australia’s largest dairy processors and purchases milk from over 400 dairy farmers across all Australian states. The company produces a wide range of dairy products across a number of brands including Pauls, Oak, Vaalia and Ice Break.
The Dairy Code (the Competition and Consumer (Industry Codes—Dairy) Regulations 2019) came into effect on 1 January 2020. It is a mandatory industry code regulating the conduct of farmers and milk processors in their dealings with one another.
Under the Dairy Code, a processor must, by 2:00pm on 1 June each year, publish on its website one or more standard form milk supply agreements; and, for each standard form milk supply agreement, a statement setting out the circumstances in which the processor would enter into the agreement.
For every exclusive milk supply agreement a processor publishes, a processor must also offer a non-exclusive supply option to farmers.
The Dairy Code requires processors to only purchase milk under a milk supply agreement. All agreements must comply with the code by meeting a number of key requirements, including:
specifying a minimum price paid for the milk;
consisting of a single document;
specifying quality and quantity requirements, including testing procedures; and
specifying the circumstances in which parties may unilaterally terminate the milk supply agreement – for processors to unilaterally terminate, the circumstances outlined must involve a ‘material breach’ by the farmer.
The publication obligations of the Dairy Code apply to all processors with an annual aggregated turnover of $10 million or more in the previous financial year.
Source: ACCC, 16 September 2022