Dairy code compliance under ACCC scrutiny

The ACCC is closely monitoring the introduction of the new mandatory dairy code of conduct, including by checking processors’ compliance with the code, and is ready to take enforcement action where appropriate.

The dairy code requires processors to only buy milk from farmers using compliant milk supply agreements, and to have published those agreements online before 2pm on 1 June 2020. Agreements must include a minimum milk price, among other conditions.

The ACCC has accessed more than 100 published milk supply agreements since 1 June and it appears most processors published at least one milk supply agreement by the deadline. However, the ACCC is undertaking a detailed review of compliance, which includes assessing whether the terms of milk supply agreements comply with the code.

“The new code is designed to address a significant imbalance in bargaining power between processors and farmers,” ACCC Deputy Chair Mick Keogh said.

“Milk supply agreements offered by dairy processors must meet certain minimum standards, like including cooling off periods for farmers while not containing contract terms that were previously used to push risk onto farmers.”

“Dairy farmers now have more information than ever to help them make a choice of processor well ahead of the start of the new season.”

“The ACCC is aware of concerns that certain processors allegedly failed to publish milk supply agreements by the specified deadline, and concerns about the content of some agreements, and is investigating these matters.”

“We are actively engaging with farmers and processors and closely watching adherence to the code so it can deliver the intended benefits to farmers and the whole industry. We note that some processors have voluntarily changed their approach after being contacted by the ACCC regarding code compliance issues.”

The ACCC also has the power to require corporations which are subject to the code to provide information and documents which the code requires them to keep or generate, and to carry out compliance checks.

“As the dairy code is legally binding, breaches may result in enforcement action by the ACCC, including going to court to seek pecuniary penalties,” Mr Keogh said.

“This is why it is so important that processors and farmers are aware of the code’s requirements and comply with them. The ACCC will take very seriously instances where parties fail to do so.”

More information, including guidance for farmers and processors, can be found at Dairy code of conduct

Background

The dairy code came into effect on 1 January 2020, following development and consultation by the Australian Government. It applies to dairy processors (other than those that meet the code’s definition of a small business entity) and farmers.

The code includes pecuniary penalty provisions, for example if processors publish or enter into a milk supply agreement that is not compliant with the code.

The ACCC is informed by its compliance and enforcement policy when considering whether to take enforcement action. Under this policy, the ACCC focuses on addressing alleged contraventions of the code that are likely to cause the greatest harm.

A mandatory dairy code of conduct was a key recommendation of the ACCC’s 2018 dairy inquiry.

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