Coles agrees to pay dairy farmers $5.25m after ACCC investigation

Coles agrees to pay Norco dairy farmers $5.25m after ACCC allegations.

The ACCC will be keeping a very close eye on Coles to ensure they follow through and we are not ruling out future litigation if necessary, ACCC chair Rod Sims said.

Coles will dish out more than $5m to dairy farmers following an investigation by the competition watchdog into allegations the supermarket giant failed to pass on the proceeds of a price increase on its fresh milk.

The supermarket giant will pay Norco Co-operative Limited around $5.25m after the ACCC claimed a 10c per litre price increase intended to support struggling farmers was not passed on, as promised by the retailer.

Coles has pledged to pay an additional 7c a litre for two litres and three litres Coles branded fresh milk products to Norco farmers who supplied Coles between April 1, 2019, and June 30, 2020, totalling around $5.25m.

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The ACCC was investigating claims that when an unrelated 6.5c a litre increase began on April 1, 2019, Coles reduced payments to Norco under the 10c a litre retail proposal to 3.5c a litre.

ACCC chair Rod Sims said there was a “strong case to allege misleading conduct”.

“We were fully prepared to take Coles to court over what we believe was an egregious breach of the Australian Consumer Law,” he said.

“Coles allowed farmers, consumers and the Australian public to believe that its 10c per litre price rise would go straight into the pockets of dairy farmers, when the ACCC alleges this was not the case for Norco farmers.”

The ACCC was investigating claims that when an unrelated 6.5c a litre increase began on April 1, 2019, Coles reduced payments to Norco under the 10c a litre retail proposal to 3.5c a litre. Picture: Supplied

Coles will pay the $5.25m lump sum to farmers within seven days for the 7c a litre base milk price increase between April 1, 2019, and December 1, 2019.

It will pass on the additional 7c a litre for the period between December 1, 2019, and June 30, 2020, at a later date.

On March 19 this year, the grocery retailer announced a 10c a litre hike on its Coles branded milk in a bid to support the Australian dairy industry.

The supermarket giant’s advertising materials had said “Coles will pass the extra 10c per litre to processors who will distribute all of the money to the farmers who supply them with milk for the Coles brand”.

“The ACCC will be keeping a very close eye on Coles to ensure they follow through on this commitment, and we are not ruling out future litigation if necessary,” Mr Sims said.

“We are pleased that Norco farmers will now receive additional money, commencing within seven days.”

In a statement issued on Thursday, Coles said it “disagreed with the ACCC’s interpretation of these issues” but instead “proposed the investment of an additional 7c per litre for two litre and three litre Coles Brand milk purchased from Norco between April 1 this year and at least the end of June 2020”.

A Coles spokesperson said the ACCC did not raise issues with any other processor.