ACCC takes Lactalis to Federal Court over alleged dairy code breaches
Milk processors have previously copped fines over alleged mandatory code breaches. But this time the competition watchdog is going one step further.
Australia’s competition watchdog has triggered court proceedings over an alleged breach of the dairy code of conduct — the first time such an action has taken place.
The Australian Competition and Consumer Competition (ACCC) has instituted Federal Court action against Lactalis Australia for a number of breaches that allegedly occurred last year.
ACCC deputy chairman Mick Keogh said all of the allegations against Lactalis relate to milk supply agreements offered to dairy farmers in 2020.
More recent agreements published on Lactalis’ website on 1 June 2021 were not the subject of the ACCC’s allegations.
“One of the key aims of the dairy code is to improve the clarity and transparency of trading arrangements between dairy farmers and the companies that buy their milk,” Mr Keogh said.
The allegations made by the ACCC include that Lactalis failed to make its milk supply agreements publicly available on its website by the deadline of 2.00pm on 1 June 2020 as required by the code, and instead required farmers to sign up to a mailing list to receive a copy of the agreements.
The ACCC alleges this had the effect of reducing the transparency of the terms and conditions in Lactalis’ milk supply agreements during a critical and limited time frame in which farmers had to weigh their supply options.
“Farmers need to have access to timely information when making decisions about which processor to supply milk to,” Mr Keogh said.
The ACCC also alleges Lactalis failed to publish genuine non-exclusive milk supply agreements, which is a key requirement under the code as it gives farmers more flexibility in choosing who to supply to.
Instead, Lactalis required farmers to supply a minimum of 90 per cent of their monthly production volume, which the ACCC alleges would prohibit most farmers from supplying milk to another processor.
The ACCC also alleged that Lactalis failed to comply with the code’s “single document” requirement by failing to provide farmers with all three documents that made up Lactalis’ milk supply agreement.
In a majority of cases, only one of the three documents was provided to farmers at the time the agreement was executed.
“It is very important that farmers have access to a complete record of the milk supply agreement they have signed up to,” Mr Keogh said.
“This safeguards against any subsequent changes to the agreement, and allows both parties to understand their rights and obligations.”
In addition, Lactalis published and entered into milk supply agreements with farmers that permitted it to terminate the agreement when, in the opinion of Lactalis, the farmer had engaged in “public denigration” of processors, key customers or other stakeholders.
The ACCC alleges this clause would allow Lactalis to terminate agreements in circumstances where there was not a material breach, when the Code requires that for processors to unilaterally terminate agreements, the circumstances must involve a material breach by the farmer.
The ACCC is seeking orders including penalties, declarations, injunctions, a corrective advertising order and costs.
Lactalis has been contacted by The Weekly Times for comment.
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