Lactalis Australia gets Federal Court slap over dairy code

French processor Lactalis has been rebuked by the Federal Court over its handling of the dairy code of conduct.

Lactalis Australia breached the mandatory dairy code of conduct, the Federal Court has ruled, in a case brought by the nation’s competition watchdog.

In a win for the Australian Competition and Consumer Commission, the court found Lactalis breached the code when it failed to publish its milk supply agreements on its corporate website by the 2pm deadline on June 1, 2020.

Instead, Lactalis required dairy farmers to sign up through a web portal to receive the agreements by email.

ACCC deputy chairman Mick Keogh said the court decision was a significant moment for the code, implemented only two years ago.

“This is an important case for the ACCC as these are the first proceedings we have instituted under the Dairy Code of Conduct,” Mr Keogh said.

“The decision is a win for dairy farmers who generally have limited bargaining power in their dealings with much larger processors.”

The Court also found Lactalis breached the dairy code by publishing and entering into agreements that allowed them to unilaterally terminate the agreement in circumstances that did not amount to a material breach.

In particular, Lactalis was permitted to unilaterally terminate the agreement when, in their opinion, the farmer had engaged in “public denigration” of processors or others.

“Farmers need to have access to timely information when making decisions about which processor to supply milk to,” Mr Keogh said.

“In breaching the code’s requirement to publish its milk supply agreements by the deadline, Lactalis made it harder for farmers to compare milk prices and contract terms across different processors.”

French giant Lactalis is officially the world’s largest dairy company, with a turnover of US$26.7 billion, according to an international league table.

More than 400 dairy farmers supply Lactalis, which produces household name brands such as Pauls, Oak, Vaalia and Ice Break.

Oak flavoured milk is one of Lactalis Australia’s popular dairy offerings

Despite the MSA ruling, the Federal Court dismissed the ACCC’s allegation that Lactalis had failed to publish genuine non-exclusive milk supply agreements by requiring farmers to supply a minimum of 90 per cent of their monthly milk production.

The ACCC alleged such a move would have the effect of prohibiting most farmers from supplying milk to another processor.

The Federal Court found that Lactalis’ subsequent publication of this agreement met the dairy code’s requirement for the publication of a non-exclusive agreement.

The Court also found that Lactalis did not fail to meet the Code’s “single document” requirement, which is intended to provide a single source of farmers’ obligations, to provide farmers with certainty regarding the content of their agreement.

“This case should serve as a reminder to all dairy processors that failure to comply with the code may result in ACCC enforcement action, including court proceedings, with serious consequences,” Mr Keogh said.

A hearing on relief, including penalties, will be held at a later date.

Lactalis Australia has been contacted for comment.