Coles forced to pay $5.25m to 326 Norco dairy farmers

Australia’s competition watchdog has forced Coles to repay millions of dollars to dairy farmers after short-changing them.

Empty promise: Coles has been found guilty of not passing on the full price rise of Coles branded milk and are forced to pay back the difference.

COLES has been caught out short-changing 326 NSW and Queensland dairy farmers, on the supermarket giant’s promise to consumers that it would pay “an extra 10 cents a litre to Australian dairy farmers”.

An Australian Competition and Consumer Commission investigation found on April 1 this year Coles cut back the 10c payment to the farmer-owned Norco dairy co-operative to 3.5c a litre.

As a result of that investigation Coles consequently agreed to pay Norco $5.25 million to distribute to its dairy farmer members.

The ACCC reported Coles has committed in writing that it will pay an additional 7c a litre for two-litre and three-litre Coles branded fresh milk, which amounts to a $5.25 million for Norco milk supplied between 1 April 2019 and 30 June 2020.

Coles stated in a media release, social media posts and in-store signage that the full 10c per litre retail price increase on its Coles branded two-litre and three-litre milk, announced on 19 March 2019, would be passed on to farmers.

An example of Coles' promise to dairy farmers. Picture: Supplied

Coles’ statements included: ‘An extra 10 cents per litre to Australian Dairy Farmers’, and, ‘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 Coles Brand’.

“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,” ACCC chairman Rod Sims said.

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

“Accepting this commitment means that farmers will receive additional payments from Coles, with the majority of the money to be paid to Norco within seven days.

“Court action would also have taken many months if not years, with no guarantee that any money would have been paid to farmers as a result.

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

“We take commitments made to us very seriously. 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,” Sims said.

But Coles has dismissed the ACCC’s intepretation of its 10-cent payment shortfall, instead saying it was making the Norco payment to help drought and bushfire-affected dairy farmers.

“Norco will receive additional financial support to help them cope with the impact of drought thanks to increased payments from Coles,” the statement read.

“Coles respects the regulatory process but disagreed with the ACCC’s interpretation of these issues. Instead, in order to avoid an unnecessary dispute and provide immediate much-needed support to Norco farmers dealing with the ongoing impact of drought and bushfires, Coles proposed the investment of an additional 7c per litre.”

Norco is a milk co-operative with 326 farmer members on 214 dairy farms in northern New South Wales and Queensland. Norco supplies milk to Coles for its Coles branded milk, and also produces milk bearing the Norco brand, which is supplied at several of Coles’ stores.

DEAL DETAILS

Coles has committed to pay a lump sum to Norco for distribution to farmers within seven days, which represents an additional 7c a litre base milk price increase for the period between 1 April 2019 and 1 December 2019.

Coles will then also pass on the additional 7c per litre to Norco farmers for the period between 1 December 2019 and at least 30 June 2020 by increasing the base milk price paid to Norco for two-litre and three-litre Coles branded fresh milk by 7c per litre.

The additional 7c per litre is more than the 6.5c per litre amount, which the ACCC alleges was not passed through to Norco farmers.

BACKGROUND

Coles has committed to providing an independent audit report to the ACCC confirming that it has paid the full 7c per litre to Norco on Coles branded two-litre and three-litre milk from 1 April 2019 to 30 June 2020, and has also committed to working with Norco to verify that Norco has passed this through to farmers.

Payments from Coles will be paid directly to Norco for distribution to its farmer members.

The ACCC understands that Coles did pass on the 10c per litre retail price increase to other dairy processors.

Coles operates one of the two biggest supermarket chains in Australia, with approximately 821 supermarkets throughout Australia under the Coles brand and approximately 714 under the Coles Express brand.