On 24 September 2019 the ACCC released its final report on the wine grape market study. The report details the ACCC’s recommendations relating to:
- quality assessments. Not all grape growers produce wine, of course, and winemakers often source grapes from vineyards other than their own. There are over 6000 growers in Australia producing over 100 grape varieties. The ACCC notes that due to the bargaining power imbalance and information asymmetry in grower-winemaker relationships, there is a lack of transparency and consistency with and issues concerning the timing and subjectivity of quality assessment methods employed by winemakers, in particular around colour assessments used for red wine grapes. The ACCC is particularly concerned about potentially unfair contract terms that allow winemakers to vary the quality assessment parameters without limitation. The ACCC recommends the National Measurement Institute and the Australian Wine Research Institute work with the wine industry to develop uniform national standards for testing and measuring grape sugar levels and colour.
- price transparency in ‘warm climate’ regions. The report notes that approximately two- thirds of annual wine grape production occurs in what is referred to as the ‘warm climate’ grape growing regions. This includes the Riverina, Murray Valley and Riverland wine regions, located in southern New South Wales, north western Victoria, and South Australia. Price transparency amongst growers is not obvious, and there has been an uncanny similarity between indicative prices and actual prices of grapes. The ACCC recommends that for grapes purchased from ‘warm climate’ regions, wine grape buyers should be required to provide pricing information for aggregation and publication by Wine Australia.
- payment periods. As reported on the ABC News website some growers are not paid by winemakers for up to nine months. At the July 2019 Australian Wine Industry Technical Conference in Adelaide, ACCC deputy chairman Mick Keogh said, “A best practice standard of payment within 30 days of grape delivery should be adopted by all winemakers with processing capacity over 10,000 tonnes.” In its final report, the ACCC recommends that long term payment periods should be phased out of standard form contracts.
- strengthening the Australian Wine Industry Code of Conduct, a voluntary code which took effect on 1 January 2009. The ACCC recommends that the Code be substantially strengthened, and that all winemakers in Australia with crushing capacities above 10,000 tonnes become signatories to the Code. Whilst the ACCC is presently not recommending a mandatory code, it will review the progress of the industry in adopting the final recommendations in 12 to 18 months’ time and has warned that if winemakers do not sign up to the Code, the ACCC will then consider recommending that a mandatory code be introduced. This has been flagged as a likely next step.
- unfair contract terms. In the report, the ACCC has “identified a range of concerning practices resulting from the bargaining power imbalance and information asymmetry in grower-winemaker relationships”, including that growers are largely price takers and are unable to effectively negotiate with winemakers and notes that the imbalances in supply agreements disproportionately allocate transactional risk to growers, allow winemakers to act unilaterally and have the potential to cause significant detriment to growers. The ACCC points to informal annual and multi-year oral agreements arising in the context of an industry culture that places a significant emphasis on loyalty to winemakers as a significant issue. The ACCC sensibly notes in its report that supply arrangements should be in writing, which may also address the issue of quality assessments: supply agreements could outline the testing and sampling methods that winemakers will use to assess grape quality. The ACCC also recommends that winemakers review their standard form contracts and remove any unfair contract terms, warning it may take enforcement action against winemakers who retain unfair contract terms, regardless of their size or region.