Brownes Foods Operations Pty Ltd (Brownes Dairy) has paid penalties totalling $22,200 after the ACCC issued it with two infringement notices for allegedly failing to comply with the Dairy Code of Conduct last year.
The Dairy Code requires most dairy processors to publish on their websites, on 1 June each year, standard form milk supply agreements to cover all the circumstances in which they intend to purchase milk in the coming financial year on their websites. This allows farmers to compare processors' minimum prices and contract terms.
The ACCC issued Brownes Dairy two infringement notices for publishing two standard form milk supply agreements (exclusive and exclusive A2) on its website in June 2020 which allegedly did not comply with the Dairy Code by:
- not specifying a definite end date of the supply period;
- allowing Brownes Dairy to unilaterally vary the agreement in circumstances other than those specified in the Dairy Code;
- allowing Brownes Dairy to unilaterally vary the agreement without the variations being in writing; and
- allowing Brownes Dairy to unilaterally reduce the minimum price for milk supplied ('unilateral prospective step down') in circumstances other than those specified in the Dairy Code.
"It is critical that processors take active steps to ensure compliance with the Dairy Code so that farmers have the certainty and transparency in relation to milk supply agreements that the Code is intended to provide," ACCC Deputy Chair Mick Keogh said.
"One of the requirements of the Dairy Code is that processors ensure their milk supply agreements are compliant before publishing them on their websites, and in this instance Brownes Dairy published two supply agreements that were allegedly non-compliant with the Code."
Brownes Dairy has addressed the ACCC's concerns in the 2021-22 agreements which it published last month. Brownes Dairy also undertook to write to farmers that it had contracts with, advising that it will only exercise its rights under existing agreements to the extent they are consistent with the terms of these new agreements.
"Ensuring compliance with the Dairy Code remains an ACCC priority. We are continuing to assess agreements published on 1 June this year, and any identified breaches may result in the ACCC taking enforcement action where appropriate," Mr Keogh said.
Background
Brownes Dairy is one of three major processors in the WA milk market, and is supplied by 50 dairy farms in WA's South West.
The Dairy Code 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.
It aims to improve the clarity and transparency of trading arrangements between dairy farmers and those buying their milk.
Under the Dairy Code, a processor must, on or before 2.00pm on 1 June each year, publish on its website:
- one or more standard forms of 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.
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.
All processors and farmers, regardless of size, must at all times deal with each other in good faith under the Code.
Note
The Dairy Code of Conduct is an abbreviation for the Competition and Consumer (Industry Codes-Dairy) Regulations 2019.
The ACCC can issue an infringement notice when it has reasonable grounds to believe a person or business has contravened a civil penalty provision of the Dairy Code.
The payment of a penalty specified in an infringement notice is not an admission of a contravention of the Dairy Code.
