ACCC seeks feedback on competition, contracting and pricing issues in its dairy inquiry

The ACCC has released an Issues Paper in its Inquiry into the Australian dairy industry seeking feedback on issues including:

  • competition between purchasers of milk at the farmgate;
  • contracting practices including pricing practices and potential unfair contract terms;
  • transparency about how farmgate milk prices are set and communicated to producers;
  • the use of price signals across the industry;
  • the impact that the practices of domestic retailers have on the dairy industry;
  • options for supply into export markets and barriers to selling into export markets; and
  • the key factors influencing the profitability of dairy farms.

The Inquiry follows a number of other developments this year that have put the spotlight on competition and consumer law issues in the dairy industry including:

  • the announcement of cuts to the farmgate milk price paid to dairy farmers;
  • issues being raised in relation to the oversupply of milk in WA, practices affecting the renewal of milk supply agreements and retail drinking milk prices;
  • the holding of a national meeting of key dairy industry stakeholders earlier this year; and
  • the creation of a Senate Inquiry that will consider issues including the legality of retrospective elements of milk contracts.

The ACCC's Issues Paper is available here. The ACCC is seeking feedback on the Issues Paper by 12 December 2016.

Interim report in cattle and beef market study shows potential competition issues in pricing process

The ACCC has released an Interim report in its Australian beef and cattle market study. Some of the ACCC's current findings suggest that:

  • buyers are likely to have access to more information than producers and prices are inconsistently reported between sales channels;
  • there are issues with the independence and transparency of the grading process; and
  • there are concerns about collective behaviour by buyers, particularly boycotts.

The ACCC has made 14 recommendations in relation to transparency in cattle markets, over the hooks transactions and grading, and conduct in cattle markets. It has also confirmed that it is investigating:

  • an agreement between a vertically integrated livestock agency and a saleyard business which is alleged to have the purpose and/or effect of foreclosing rival agents from a saleyard; and
  • bid-rigging in saleyard auctions.

A copy of the Interim report is available here. The ACCC is seeking comments on the Interim report by 23 November 2016.

New law commences for unfair contract terms in small business contracts

On 12 November 2016, the unfair contract term laws in relation to small business standard form contracts came into effect. The new law is particularly important to businesses operating in the food and beverage sector including because:

  • the ACCC has suggested that farmers' milk supply agreements may be standard form contracts that involve a small business; and
  • the ACCC recently released a report focusing on unfair contract terms in particular sectors, which included agriculture and franchising. In that Report, the ACCC highlighted that there were a number of common terms in standard form contracts in those sectors that could raise concerns under the new law.

The ACCC's Report on unfair terms in small business contracts contains examples of how terms that are often used in the franchising and agriculture sectors can be amended to make them more fair. Click here to read more about the ACCC's Report.

Supermarket delisting raises concerns under the Code

The Australian Food and Grocery Code of Conduct (the 'Code') provides that a retailer may only delist a supplier’s grocery product in accordance with the terms of the relevant grocery supply agreement and for genuine commercial reasons. Genuine commercial reasons include:

  • failure of the supplier to meet agreed quality or quantity requirements with respect to the product;
  • failure of the supplier’s product to meet the retailer’s commercial sales or profitability targets as notified to the supplier in, or in accordance with, the grocery supply agreement; and
  • persistent failure to meet the retailer’s delivery requirements as notified to the supplier from time to time in accordance with the grocery supply agreement.

The ACCC has conducted compliance checks on a number of retailers and stated that it has concerns about the method by which supermarkets delist products. During its checks, the ACCC found that:

  • some of the retailers' delisting notices did not give suppliers reasonable notice, did not include any real reasons for the delisting, or contained reasons that were very general in nature and not specific to the supplier; and
  • the notices often overlooked the supplier's right to have the delisting decision reviewed and did not contain basic information about the option to review the decision.

Click here to read the Chairman's recent speech at the Australian Food & Grocery Council Leaders Forum where supermarket delisting and other issues regarding the Code were discussed.

Interim Report released in Australian Consumer Law review

Last month, Consumer Affairs Australia and New Zealand (CAANZ) released an Interim Report on the Australian Consumer Law Review. The Interim Report provides potential options to improve the following areas of law:

  • consumer guarantees;
  • product safety;
  • unconscionable conduct;
  • unfair contract terms; and
  • unsolicited consumer agreements.

For several years, the ACCC has been active in its enforcement of potential breaches of the ACL by businesses in the food and beverage sector. The ACL review provides an opportunity for businesses to have their say on how they think the current laws can be improved.

You can view the full Interim Report here. Submissions on the Interim Report can be made up until 9 December 2016.

On the horizon

The developments outlined above indicate that there is currently a focus on competition issues in agriculture and unfair practices involving small businesses.

This focus on the agriculture sector seems likely to continue into 2017. The ACCC has indicated that its final report in relation to the dairy inquiry will be released in November 2017 and it is yet to announce a date for completion of its cattle and beef market study.

Further, the focus on potential reforms to the Australian Consumer Law will continue into 2017. The final report on the Australian Consumer Law Review is scheduled to be released by CAANZ by March 2017 and the Productivity Commission is also expecting to release its research report on Consumer Law Enforcement and Administration around the same time.