ACCC commences new inquiry into perishable agricultural products and the dairy code

The Federal Government tasked the ACCC with yet another inquiry into Australian agribusiness.

This time, the Treasurer has directed the ACCC to examine the markets for the supply of ‘perishable goods’ – essentially products containing animal meat, as well as vegetables, dairy products and eggs.

This is the latest in a string of inquiries into agriculture conducted under the ACCC’s broad ‘price monitoring’ powers, which have included the Dairy inquiry, the beef cattle market study, the wine grape market study, and the ongoing inquiry into the Murray Darling Basin water markets.

An important difference with this inquiry is that it will be short, with the ACCC required to produce its final report to the Treasurer by 30 November 2020. That means the entire inquiry will run for just over 3 months in total.

The inquiry is targeted at identifying issues at any level of the supply chain for a perishable product. While there is a clear emphasis on finding things that might lead to ‘unfair’ outcomes for farmers, the inquiry presents an opportunity for all businesses involved in perishable product supply chains - including large businesses - to provide insights to the ACCC.

Scope of the inquiry – supply chains and structures

The terms of reference direct the ACCC to examine the behaviour of market participants in each level of the domestic supply chain for perishable products. Specifically, the issues the ACCC has been asked to examine include:

  • whether there is concentration of power in the markets “amongst and between suppliers of perishable agricultural goods”;
  • whether imbalances in bargaining relationships exist and the extent to which they can be addressed through existing regulatory arrangements;
  • the effectiveness of the new Dairy Code of Conduct (Dairy Code), which will involve considering options to extend the Diary Code across the entire domestic dairy supply chain (including supermarkets); and
  • the practices and behaviours of suppliers in perishable agricultural goods markets, and “the effect those practices and behaviours may have on consumers and the broader economy.

ACCC’s outline of issues – when there just isn’t time for an issues paper

Unlike a typical ACCC inquiry, because of the short timeframe there will be no “issues paper” released by the ACCC.

Instead, on 3 September 2020 the ACCC issued an open invitation for interested parties to make submissions in response to the terms of reference.

To help guide the information it receives, the ACCC has indicated it would welcome submissions that canvass the following:

  • how the relative bargaining power of farmers, processors and retailers involved in supply chains for perishable agricultural goods affects trading practices which can, in turn, affect the efficient operation of these markets;
  • possible options to address those issues or concerns; and
  • the potential impact of any such options on the ability of Australian suppliers to compete in “global markets for perishable agricultural goods”.

What does the ACCC want to know about?

The ACCC has also called out the following as matters that parties may wish to comment specifically in their submission:

  • the levels of concentration, and the relative bargaining power, of suppliers at each level of the domestic supply chain;
  • relationships between suppliers at each level of the domestic supply chain;
  • risks faced by various suppliers, the sources of those risks and the options for dealing with them;
  • practices and behaviours of buyers of perishable agricultural goods and the effect these have on issues such as:
    • the incentives for growers to invest in farming and supply of these goods, or for processors to invest in manufacturing, product quality and innovation;
    • the wholesale prices negotiated; and
    • the prices or quantities of goods supplied to consumers;
  • the effectiveness of the Dairy Code in addressing bargaining power imbalances throughout supply chains, and also the extent to which the cost of producing milk in different parts of Australia is taken into account by participants within the supply chain.

Given how broad the terms of reference are and in the absence of some guidance or direction from the ACCC via an Issues Paper, it could be difficult for industry participants to understand exactly how to prepare a submission. However, the specific matters listed above make it fairly clear that the ACCC wants to understand both the structural market dynamics in these supply chains, and also whether there are specific types of conduct at any level of a perishable supply chain that are contributing to inefficient or inequitable/unfair outcomes.

The notion of ‘fairness’ has been a key theme reiterated in the Government’s announcements about this inquiry, with Agricultural Minister David Littleproud stating that “this isn’t about regulating prices, this is just making sure farmers are treated fairly.”

Confidentiality for submissions

An ACCC inquiry under its statutory monitoring powers is predominantly a public process, and submissions are ordinarily published on its website, subject to limited confidentiality arrangements.

But quite notably in this case, the ACCC has reiterated its ability to receive information on a confidential basis, and has included the following statement as part of its invitation for submissions:

The ACCC is mindful that farmers and suppliers and their representatives may have concerns about making a written submission that will be made public as part of the inquiry.”

It is important to note that the Treasurer’s direction allows the ACCC to receive and consider submissions provided on a confidential basis, and the ACCC intend to do so in order to encourage full and frank participation by farmers and suppliers.

Next steps

Submissions from all interested parties are due by 18 September 2020, and can be lodged electronically or via post.

It’s worth noting there probably won’t be as much leeway as in previous inquiries for late material to be accepted, because the ACCC’s final report must be with the Government no more than 6 weeks after that, on 30 November 2020.