A mandatory code of conduct for Australia’s dairy industry would begin the process to wipe-out unfair clauses in milk supply agreements between dairy farmers and milk processors nationally.
This was the view today of Dairy Connect CEO Shaughn Morgan against a backdrop in which ABC Rural reported this week that across NSW, farmers were deserting the industry because of poor milk prices.
The Australian Competition and Consumer Commission had highlighted its concerns regarding clauses in milk supply agreements between Victorian processor Warrnambool Cheese & Butter (WCB) and its fresh milk suppliers as being unfair.
WCB has emailed its suppliers telling them that it would waive its contractual rights relating to penalty repayments to WCB if the contract relationship ended; to demand supply exclusivity; and to vary producer indemnities.
The ACCC has also intervened to alter unfair clauses in contracts between Australia’s biggest potato wholesaler the Mitolo Group and its farmer growers that it said breached the new Horticulture Mandatory Industry Code.
The Mitolo Group processes and packages around 500 tonnes of fresh potatoes a day to supply to Australia’s supermarkets and grocery stores.
The commission alleged Mitolo’s contracts contained unfair contract terms, including one that prevented grower suppliers from selling their properties unless the prospective purchaser entered into an exclusive supply agreement with Mitolo.
The ACCC alleged Mitolo’s contracts with its growers breached the mandatory Horticulture Code by allowing the company to: determine or vary the price Mitolo paid farmers for potatoes; vary other contractual terms; declare potatoes as ‘waste’ without review; and prevent farmers from selling potatoes to alternative customers.
ACCC deputy chair Mick Keogh told the Weekly Times that the Mitolo case was the first taken under the newly introduced Horticulture Code and the first to apply new laws on unfair contract terms to an agricultural industry.
“The issues in this case go to the heart of concerns about unfairness in the agriculture sector that led to the establishment of the ACCC’s dedicated Agriculture Unit,” Mick Keogh said.
“These are some of the most egregious terms we have seen in agricultural contracts and are key examples of the contracting practices in the sector that we want to address.
“We believe that these terms have caused, or could cause, significant detriment to farmers, by passing a heavy burden of risk down to farmers, the most vulnerable player in the supply chain.”
The ACCC alleged Mitolo entered into exclusive supply contracts with growers before or at the time of planting but did not determine the price it would pay until the potatoes were ready to harvest.
The ACCC reported that Mitolo’s contract terms came to the ACCC’s attention following complaints from industry associations and farmers.
The Horticulture Code prohibits growers and wholesalers from trading in horticulture produce without a written agreement that complies with the requirements of the code.
Traders face penalties of up to $63,000 for each instance of trading without a Horticulture Code compliant agreement.
“This action by the ACCC illustrates the importance of a mandatory code to be introduced for the dairy industry, thus ensuring fairness and balance with oversight by an independent arbiter, the ACCC,” Shaughn Morgan said.
The sooner the Federal Government publicly commits to the recommendations of the ACCC, the sooner trust and integrity can be returned to the Australian dairy industry,” Shaughn concluded.