Processors change contract terms

03 Dec, 2018 10:43 AM
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Mick Keogh: Assessing unfair contract terms in the dairy industry is complex and requires careful consideration.
Farmers should be getting a fair deal when they contract to supply milk to dairy processors.
Mick Keogh: Assessing unfair contract terms in the dairy industry is complex and requires careful consideration.

Five dairy processors have changed contract terms after bowing to pressure from the Australian Competition and Consumer Commission.

The ACCC said Brownes Food Operations, Lion Dairy & Drinks, Norco Co-operative Limited, Parmalat Australia and Fonterra Australia have each agreed to amend specific terms in their milk supply agreements to address the ACCC’s concerns these terms were unfair to dairy farmers.

The ACCC said it had been working with dairy processors for the past year to ensure that terms in the contracts they offered farmers complied with the business-to-business unfair contract terms law enacted by the Australian Government in November 2016.

“Farmers should be getting a fair deal when they contract to supply milk to dairy processors,” ACCC deputy chair Mick Keogh said.

“Assessing unfair contract terms in the dairy industry is complex and requires careful consideration.

"Our work focused on terms in milk supply contracts that have the potential to cause the greatest harm to farmers.”

Most processors have agreed to provide dairy farmers with the right to terminate their contract if the processor varies supply terms such as price or quality requirements, placing the farmer in a worse position.

The ACCC also raised concerns with some processors about lengthy notice periods for farmers to terminate their contracts, one-sided termination rights, broad indemnities, and terms that restrict a farmer’s ability to lease a farm or sell their cattle.

“The ACCC worked with each processor individually to ensure amendments did not disadvantage farmers,” Mr Keogh said.

“Where we raised concerns, most processors worked with us to find a solution to better balance farmers’ rights under the contracts.”

The ACCC conducted an inquiry into the competitiveness, trading practices, and transparency of the Australian dairy industry.

The ACCC submitted its final report to the Treasurer on April 30.

The report included a recommendation to improve contracting practices that dairy processors and farmers implement a mandatory code of conduct.

The ACCC announced in July 2018 Warrnambool Cheese and Butter Factory Company Holdings Limited, which is owned by Saputo Inc, altered terms in its milk supply agreements and milk supply handbook.

The Australian Consumer Law (ACL) aims to protect consumers and ensure fair trading in Australia.

Amendments to the unfair contract terms provisions of the ACL, to extend them to business to business transactions, came into effect on November 12, 2016.

The ACCC has produced guidance on the application of the unfair contract terms law, which is available at www.accc.gov.au/uct.

The ACCC has called for major changes to strengthen enforcement of the unfair contract terms law, including introducing penalties.

Related reading

  • ACCC recommends mandatory code
  • WCB and Saputo agree to contact changes
  • ACCC action welcomed
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