July 27, 2023
The Federal Court has ordered dairy processor Lactalis Australia Pty Ltd to pay $950,000 in penalties for contravening the Dairy Code of Conduct.
Proceedings were initiated by the Australian Competition and Consumer Commission (ACCC) in 2021.
Last September, the Court found Lactalis had breached a number of provisions of the Code, and, in doing so, had weakened the bargaining power of farmers who supplied milk to them.
The penalties were handed down by the Court on Tuesday this week.
All of the allegations related to milk supply agreements offered to dairy farmers in 2020.
Lactalis is one of Australia’s largest dairy processors and purchases milk from more than 400 dairy farmers across all Australian States.
The company produces a wide range of dairy products including Pauls, Oak, Vaalia and Ice Break brands.
“One of the key aims of the Dairy Code is to improve the clarity and transparency of trading arrangements between dairy farmers and the companies that buy their milk,” ACCC Deputy Chair Mick Keogh said.
The allegations made by the ACCC included that Lactalis failed to make its milk supply agreements publicly available on its website as required by the Code.
The company instead required farmers to sign up to a mailing list to receive a copy of the agreements. This had the effect of reducing the transparency of the terms and conditions in Lactalis’ milk supply agreements during a critical and limited timeframe in which farmers had to weigh their supply options.
“Farmers need to have access to timely information when making decisions about which processor to supply milk to,” Mr Keogh said.
The ACCC also alleged Lactalis failed to publish genuine non-exclusive milk supply agreements, which was a key requirement under the Code as it gave farmers more flexibility in choosing who to supply to.
Instead, Lactalis required farmers to supply a minimum of 90 per cent of their monthly production volume, which the ACCC alleged would prohibit most farmers from supplying milk to another processor.
Lactalis also entered into agreements with farmers that permitted it to terminate the agreement when, in the opinion of Lactalis, the farmer had engaged in “public denigration” of processors, key customers or other stakeholders.
The ACCC alleged this clause would allow Lactalis to terminate agreements in circumstances where there was not a material breach.
“It is positive to see that the ACCC is enforcing the code where there are breaches including by taking court action against processors,” eastAUSmilk CEO Eric Danzi said.
“This is a reminder to all processors to ensure they act responsibly and adhere to the code or the ACCC could take action against them.
“A review of the Dairy Code by the Federal Government is due to occur in the next year and it is time to tighten the code to ensure that the code is effective and that any loopholes are closed.
“Issues such as minimum pricing in long term contracts and the effectiveness of the grocery code are issues that need to be reviewed.”
