Riverland one of the wine regions highlighted as being in danger from ‘harmful practices’

An ACCC report has highlighted harmful market practices within the wine industry.

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Harmful market practices are restricting competition in some wine grape growing regions, including the Riverland.

This is one of the findings of an interim report released by the Australian Competition and Consumer Commission.

The ACCC has highlighted concerning practices it believes are common across high-production, warm climate wine grape-growing regions including a lack of transparency and certainty over how grapes are priced and assessed for quality, as well as supply contracts that run for multiple years but do not offer price certainty to growers.

“We found that winemakers do not publicise the prices they pay to growers and often have confidentiality terms to prevent growers from disclosing their indicative and final prices to other growers,” ACCC deputy chairman Mick Keogh said.

“Meanwhile, various supply arrangements appear to favour incumbent buyers of bulk wine grapes, such as exclusive supply clauses, automatic and long term contract extensions, and difficult contract termination obligations on growers.”

The ACCC is also concerned about delayed payment terms for growers, which can sometimes stretch up to nine months after grapes have been delivered to a winery.

“There are significant bargaining power imbalances between large winemakers and the small growers who supply them, a dynamic that is common between suppliers and processors across the agricultural sector,” Mr Keogh said.

“This power imbalance is particularly evident in the bulk wine grapes industry.”

The ACCC’s interim recommendations include:

WINEMAKERS in warm climate regions be required to provide indicative and final grape prices to an independent third party for simultaneous public release.

PAYMENT terms for wine grapes be shortened so growers are paid within 30 days of delivering grapes.

OBJECTIVE standardised testing for wine grape quality assessments be developed.

DISPUTE resolution mechanisms in the Australian Wine Industry Code of Conduct be improved.

“Increased transparency over indicative and final prices is likely to lead to greater competition between winemakers, and better outcomes for growers,” Mr Keogh said.

During the study, the ACCC closely examined the operation of the voluntary Australian Wine Industry Code of Conduct, in place since 2009. The code’s impact has been limited due to the low numbers of winemakers that have signed up.

The ACCC found the code’s key benefit to growers and winemakers was in providing a structured process for resolving disputes about price and quality assessments of wine grapes.

However, because many major winemakers are not signatories to the code, many growers are not able to access its dispute resolution mechanisms.

“The ACCC recommends that Australian winemakers with more than 10,000 tonnes of processing capacity sign the code,” Mr Keogh said.

“If more big winemakers don’t sign up, a mandatory code may be needed to bring about the required industry reforms.”

Australian Grape & Wine chief executive Tony Battaglene said while the sector was in a relatively strong position, the organisation welcomed any opportunity to further boost commercial relationships in the Australian wine sector.

“We encourage winegrape growers and winemakers to make sure their views are taken into account in the process,” he said.

The ACCC is seeking feedback on the interim report by June 28 and expects to release a final report in September.