ACCC to investigate market abuse of farmers

The competition watchdog will investigate claims of unfair contract terms in the chicken meat and horticultural markets.

Victorian vegetable grower David Wallace. The ACCC is investigating whether producers of perishable goods are being treated fairly. Picture: Andy Rogers

The Australian Competition and Consumer Commission will investigate claims of market abuse, with unfair contract terms, in the chicken meat and horticultural markets.

It follows the regulator’s review of the perishable goods supply chain.

The report released this week “found that a number of features of perishable agricultural goods supply chains have the potential to cause harm to suppliers and the efficiency of markets more generally,” ACCC Deputy Chair Mick Keogh said in a statement .

The ACCC said the report also highlighted the need for tougher unfair trading practices laws in business, as well as business-to consumer markets.

The report said the problem was there were many farmers, fewer processors and even fewer supermarket chains, which had an impact on bargaining power.

“In most perishable agricultural goods markets, there are many farmers, but few processors or wholesalers, and even fewer major retailers,” Mr Keogh added

“This makes farmers particularly vulnerable to issues stemming from limited competition at the wholesale or retail level. In addition, the more perishable a product is, the weaker the farmer’s bargaining power often is.”

The report says a lack of price transparency in markets for perishable goods can also weaken bargaining power. This is particularly the case for farmers, who are typically not in a position to influence the prices they receive for their goods.

“The effects of imbalances in bargaining power can weaken confidence in markets, reduce incentives to invest, and result in slower productivity growth,” Mr Keogh said.

The report said: “The findings of this report provide further evidence that an economy-wide unfair trading practices provision is needed.

“Introducing a prohibition on unfair trading practices to the Australian Consumer Law is necessary to reduce the significant harms that are not currently captured by the provisions of the ACL, and which will not be covered by the proposed reforms to unfair contract terms laws.” it said

“An unfair trading practices provision is likely to provide greater flexibility and is less likely to constrain innovation when compared to a code across perishable goods industries,” it added.

The report noted: “Bargaining power imbalances are a common feature of markets for perishable agricultural goods. Economies of scale at the processing and retail levels result in market structures where there are a relatively small number of buyers acquiring the majority of produce.

“The more perishable a product, the more vulnerable the producer is to being subject to take-it-or-leave-it terms from buyers.

“In contrast to agricultural goods which can be stored, there is limited or no ability to delay or withhold supply to negotiate better supply terms,” it added.

Bargaining power imbalances are also present at the wholesale level of the supply chains of perishable agricultural goods, and processors and wholesalers exist in a highly contested, tough bargaining environment, the report says.