Agricultural Commissioner Mick Keogh has defended the Australian Competition and Consumer Commission’s (ACCC) decision not to pursue Fonterra over last year’s milk price step-down, in the same way it did with Murray Goulburn (MG).
The New Zealand company cut its farm gate milk price by 60 cents, to $5 a kilogram/milk solids (kg/MS), in May last year, following the lead of Australia’s biggest processor, Murray Goulburn (MG).
Mr Keogh said after “careful consideration” the ACCC had decided not to take action against Fonterra.
“The key reason, for the ACCC in deciding not to take action was that Fonterra provided more information to farmers, about the risks and potential for reduction in the farmgate milk price, from quite early in the season.
“There is also the issue of the situation in relation to the Bonlac Supply Company (BSC) Agreement and how that impacted on decisions that might have been available to Fonterra.
“We are aware of a number of issues in relation to the Bonlac Supply Agreement and there has been quite a deal of documentation sought about that - that will certainly come under a fair bit of scrutiny.
“Fonterra had indicated it wasn’t comfortable with the pricing, that was prevailing, prior to the announced step downs in April; but for the Bonlac Supply Agreement it may have considered reducing prices earlier.”
Last month, the ACCC lodged proceedings in the Federal Court against Murray Goulburn (MG), and former executives Gary Helou and Bradley Hingle, on the counts of misleading and deceptive conduct and unconscionable conduct.
The action stated the conduct was of serious and real concern, and that MG would have a reasonable basis for determining its pricing and disclosing critical information, in a timely way.
Mr Keogh said the ACCC’s dairy inquiry allowed it to look more broadly at contracting practices, and their effects on competition, even if they didn’t strictly constitute a breach of the act.
“That means the sorts of actions that were taken by Fonterra will certainly come under a fair bit more consideration, as part of the broader inquiry, into the dairy industry.”
He said the ACCC’s Federal Court action was intended to deter similar conduct from occurring in the future, and to hold MG, Mr Helou and Mr Hingle accountable.
It was also hoped to encourage MG to maintain a higher degree of milk pricing transparency, so its farmers were more likely to be better informed into the future.
If the ACCC sought financial penalties from MG “they would be landing on your front gate, in the form of a financial penalty to that organisation, which potentially translates to a lower milk price.
But he said it was up to the court to decide whether the actions were a breach of the law and what penalties would apply.
Mr Keogh said commercial arrangements in the sector did not appear to have evolved, to reflect changes that occurred as a result of the deregulation of the industry, in 2000.
“Where they have evolved, they have evolved in a way that seems to confer greater risk and greater disadvantage on farmers.”
The conference voted for a resolution, moved by Crossley dairy farmer Karinjeet Singh-Mahil, that the UDV condemn Fonterra’s conduct as unethical.
The resolution also asked that the company’s unethical behaviour cease and reparations be made to farmers.
