Dairy processors have generally improved their compliance with the Dairy Code for the start of the 2021-22 season, but there are still areas of non-compliance that need to be addressed. That is according to a new ACCC report that looks at Dairy Code compliance during the opening of the 2021-22 season.
Some of the issues identified in the report include dairy processors failing to publish dispute reports, using rolling agreements instead of defining contract end dates, and prematurely removing milk supply contracts from their websites.
"While individual instances of non-compliance may only cause low levels of harm, widespread non-compliance undermines the ability of the Dairy Code to improve transparency across the industry. Transparency is the key to addressing the bargaining power imbalances that can harm dairy farmers," ACCC Deputy Chair Mick Keogh said.
"The Dairy Code has clearly fostered positive changes in the industry by improving the transparency and certainty of agreements between farmers and processors, but we have identified a number of areas where some processors need to improve their compliance."
"We call on processors to review their milk supply agreements and contracting practices, and to consider seeking legal advice to ensure they fully comply with the Code," Mr Keogh said.
The report identifies that processors' main areas of non-compliance in the 2021-22 season so far are failing to publish a disputes report, and the removal of milk supply agreements before the end of the financial year. It also emphasises that processors must ensure their contractual requirements around renewal or termination of agreements do not have the effect of creating rolling agreements.
The report explains that the ACCC is shifting its focus from Dairy Code education and engagement work to enforcement.
"As is appropriate with a new industry code, we have engaged extensively with the dairy industry over the past two years to assist processors and farmers to understand their rights and obligations under the Dairy Code," Mr Keogh said.
"Processors have now had enough time to learn what their obligations are under the Dairy Code, and future instances of non-compliance face a greater risk of enforcement action by the ACCC."
The ACCC will provide updated guidance on the Code ahead of the 2022-23 season opening.
Background
The Competition and Consumer (Industry Codes - Dairy) Regulations 2019 (the Dairy Code) is a mandatory industry code regulating the conduct of dairy farmers and processors in their dealings with one another. The ACCC is responsible for enforcing the Code.
Some provisions of the Dairy Code allow for penalties. Not complying with a penalty provision could result in the ACCC taking court action seeking a financial penalty for the breach, or issuing an infringement notice.
Not complying with a penalty provision in the Code may result in:
for processors that do not meet the definition of a small business entity - up to 300 penalty units ($66,600 as of 1 July 2020) per breach
for farmers and processors that do meet the definition of a small business entity - up to 100 penalty units ($22,200 as of 1 July 2020) per breach.
In September this year, Dairy Farmers Milk Co-operative paid a penalty for allegedly failing to comply with its publishing obligations under the Code in the 2021-22 season.
In July this year, the ACCC commenced proceedings against Lactalis Australia in relation to a number of alleged breaches of the Code during the 2020-21 season.
Brownes Dairy and Union Dairy Company have also paid penalties for alleged non-compliance with the Code in the 2020-21 season.
Dairy seasons commence in June each year, so some key Code requirements, such as publishing milk agreements ahead of a season opening, were first put into practice in the 2020-21 dairy season (that is, last season).
The Department of Agriculture, Water and the Environment is currently conducting a review of the role, impact and operation of the Dairy Code. The Department must provide a report to the Treasurer by 31 December 2021. The ACCC has made a submission to that review. However, this report is not part of the Department's review.
