The world's largest dairy company Lactalis has been fined $950,000 for breaching the Australian Dairy Code of Conduct.
The Federal Court has ordered the dairy goliath to pay huge penalties for failing to meet some of its obligations in relation to the 2020-21 milk season.
Lactalis was taken to court by the Australian Competition and Consumer Commission.
The court found in September 2022 that Lactalis had breached the Dairy Code in two ways.
It failed to publish its milk supply agreements on its website by the code's deadline of 2pm on June, 1 2020, and instead required dairy farmers to sign-up through a web portal to receive them by email.
The court also found that Lactalis breached the 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, key customers or other stakeholders.
"We took action because we considered Lactalis conduct would reduce transparency in the industry and served to perpetuate systemic bargaining power imbalances between processors and farmers," ACCC deputy chair Mick Keogh said.
"These were the first contested proceedings under the dairy code and the outcome is an ongoing reminder that processors who fail to comply with the code may face significant penalties."
The court found clauses like these struck at the code's essential objective, and, although there was no evidence of any harm suffered, it was possible it had "a chilling effect on the farmers who were subject to it".
Lactalis is one of Australia's largest dairy processors and buys milk from more than 400 dairy farmers across all Australian states.
The company produces a wide range of dairy products across a number of brands including Pauls, Oak, Vaalia and Ice Break.
The code started in 2020 to address systemic transparency issues and bargaining power imbalances between dairy farmers and processors.
"The code was introduced to help dairy farmers make informed choices about where they sell their milk by ensuring there is transparency in pricing agreements and by allowing them to compare agreements from different processors in a timely fashion," Mr Keogh said.
"Ensuring that small businesses receive the protections they are entitled to under industry codes continues to be one of the ACCC's enduring compliance and enforcement priorities."
Under the Dairy Code, a processor must, by 2pm on June 1 each year, publish its standard form milk supply agreements on its website.
For every exclusive milk supply agreement, a processor publishes, a processor must also offer a non-exclusive supply option to farmers.
The dairy code requires processors to only buy milk under a milk supply agreement.
All agreements must comply with the code by meeting a number of key requirements, including:
- specifying a minimum price paid for the milk;
- consisting of a single document;
- specifying quality and quantity requirements, including testing procedures; and
- specifying the circumstances in which parties may unilaterally terminate the milk supply agreement - for processors to unilaterally terminate, the circumstances outlined must involve a 'material breach' by the farmer.
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