The Saputo-owned Warrnambool Cheese and Butter (WCB) has altered the terms of its milk supply agreements with farmers after the Australian Consumer and Competition Commission (ACCC) found them “potentially unfair.”
The ACCC said WCB’s contracts with farmers contained terms that allowed it to unilaterally vary the milk price and other milk supply terms, with the farmer unable to terminate the milk supply agreement early without incurring a financial penalty.
WCB’s contracts also placed restrictions on farmers selling their farm and required farmers to indemnify WCB for loss that could be avoided or mitigated by WCB.
The ACCC said WCB acted promptly and agreed to take steps to address its concerns.
WCB had said it would not impose a penalty on any farmer who terminated their milk supply agreement before the expiration date, that it would not unreasonably withhold consent from a farmer wishing to sell their farm, and it would narrow the scope of the indemnity required from farmers, the ACCC said.
“Unfair contract terms in milk supply agreements have the potential to harm dairyfarmers and their businesses,” ACCC deputy chair Mick Keogh said.
“WCB has worked with the ACCC to find a solution that balances the farmers’ rights under the milk supply agreements and addresses the ACCC’s concerns about potentially unfair contract terms.”
Saputo said the ACCC had identified 21 milk suppliers who were potentially impacted by its concerns.
“While WCB did not think the operation of the Milk Supply Agreements has been unfair, and no milk suppliers had raised any concerns over the alleged unfair terms, WCB co-operated fully with the ACCC by offering a series of measures, which have been accepted by the ACCC and fully address its concerns," it said.
“To further support its milk suppliers, WCB also extended these measures to another 80 suppliers, who were not directly impacted by the ACCC’s concerns.
“WCB highly values its milk suppliers and considers these relationships as essential to the success of its business.”
The Canadian-based Saputo became Australia’s largest dairy processor when it added the Murray Goulburn (MG) group of dairy factories in May to the WCB factory it acquired in 2014.
Saputo is currently in the process of selling off MG’s Koroit factory because of the ACCC’s concerns that it would have too much control of the regional milk market if it owned both WCB and the MG Koroit factory.