All I could think as I scrolled through the interim ACCC dairy report was “Wow!”. Any fears farmers had that the ACCC would fail to understand the intricacies of our industry have been well and truly put to bed. This report proves the regulator gets it.
“…the problems we have identified in this inquiry emanate from the inherent bargaining power imbalances in the industry, particularly between processors and farmers.”
– p. 22, ACCC Dairy Inquiry Interim Report
While there are more than 200 pages of very interesting information, the really important section deals with the regulator’s eight recommendations:
1. Processors and farmers should enter into written contracts for milk supply that are signed by the farmer.
2. All processors should simplify their contracts where possible, including by minimising the number of documents and clearly indicating which documents contain terms and conditions of milk supply.
3. Milk supply contracts should not include terms which unreasonably restrict farmers from switching between processors.
4. The industry should establish a process whereby an independent body can administer mediation and act as a binding arbitrator or expert in relation to contractual disputes between farmers and processors.
5. Farmers should ensure they have properly considered the legal and financial implications of contracts with processors.
6. Processors should publish information identifying how their pricing offers apply to individual farm production characteristics to enable better farm income forecasts.
7. The Voluntary Dairy Code should be strengthened
Notwithstanding Recommendation 8, the Voluntary Code will continue to operate for at least the short-to-medium term. The following amendments should be made:
(a) processors to include a comprehensive dispute resolution process in their milk supply agreements, including where this relates to compliance with the Voluntary Code itself
(b) processors to provide timely price and other contract information before requiring farmers to make a decision about renewing a contract.
(c) with regard to section 6 of the Voluntary Code, removal of the incumbent processor’s first right of refusal regarding a farmer’s supply of milk to an alternative processor.
8. A mandatory code of conduct within the Competition and Consumer Act 2010 should be considered for the dairy industry.
It’ll take time to digest the report properly and I’m betting that some of the details will be hotly debated over the next few weeks. That’s a good thing.
This ACCC inquiry is not a whitewash. The system is broken and such a strong report offers us a way to climb out of the deep hole we’re in towards the light.