Since the ACCC recommended a mandatory code for the interactions between dairy farmers and processors, there’s been a lot of talk about what this might mean. To help sort the fact from the fiction, I asked the ACCC’s deputy chair, Mick Keogh, about the fundamentals.
Milk Maid Marian is really grateful to Mick for his explanation.
MMM: How does a mandatory code differ from a prescribed voluntary code?
MK: There are three types of industry codes – (1) a voluntary code (such as the current Dairy Code), (2) a prescribed voluntary code (such as the Food and Grocery Code), and (3) a mandatory code (such as the Horticulture code).
A voluntary code is one developed by industry which participants voluntarily agree to by becoming signatories, but which has no penalties attached to breaches, and participants can choose to opt out of at any time without disadvantage.
A prescribed voluntary code is one which participants voluntarily agree to by becoming signatories, and which can have penalties or sanctions associated with breaches by participants.
A mandatory Code is one which all the relevant industry participants are bound to abide by, and which may have penalties or sanctions if a participant breaches the code.
The key difference between a prescribed mandatory code and a prescribed voluntary code is that a prescribed voluntary code only applies to industry participants who voluntarily choose to become a signatory to the code. Signatories can choose to withdraw and cease to be bound by a voluntary code at any time (although they will still be liable for breaches that occurred while they were signatories). In contrast, a mandatory code is legally binding on all industry participants specified within the code.
Prescribed voluntary codes and mandatory codes are both developed by Government in consultation with industry participants and the public, and administered by the ACCC. The ACCC can take enforcement action against parties that a prescribed voluntary code or mandatory applies to. Remedies include injunctions, damages, non‑punitive orders and other compensatory orders. Penalties and infringement notices may apply, but are more likely in a mandatory code than a prescribed voluntary code.
Any person who suffers loss or damage due to a contravention of a prescribed voluntary code or mandatory code can also bring a court action for damages.
MMM: What are the pros and cons of each?
MK: In the context of the dairy industry, the ACCC found that a mandatory code is likely to be stronger than a voluntary code in both the coverage of its enforceability and the potential for its substantive obligations to address issues which lead to market failures. We found that dairy processors are unlikely to volunteer to be covered by a prescribed voluntary code that is strong enough to address the market failures we identified in the dairy industry.
MMM: What is the normal process involved in drafting a mandatory code?
MK: If the Government agrees to pursue the creation of a prescribed mandatory code, the process will involve several stages, including stakeholder consultation with businesses, consumers and relevant government agencies, including the ACCC.
Following consultation with the industry, the responsible department will prepare a draft Regulatory Impact Statement, which evaluates the relevant issues and problems in question, objectives of a potential code and options for addressing the identified issues. This statement would be released for public consultation before it is finalised.
Afterwards the Department with policy carriage will draft the text of the proposed code and may seek public feedback on it.
When it is finalised, the Governor General will make a regulation prescribing the code. The code regulation will then be registered and tabled in each House of Parliament, where it can be disallowed within 15 sitting days in each House.
Treasury processes to prescribe an industry code are set out at: https://treasury.gov.au/publication/policy-guidelines-on-prescribing-industry-codes/process-and-consultation-after-a-decision-to-prescribe-an-industry-code/
MMM: How long does it typically take to put a mandatory code in place?
MK: The time it takes to put a prescribed code in place (from announcement to implementation) will depend on a range of factors.
The time can range from about a month (as was the case for the Wheat Port Code and the Sugar Code) to several years (including a transition period, for example for the Horticulture Code).
MMM: What is involved if stakeholders agree that a mandatory code needs to be revised?
MK: A prescribed mandatory code may be subject to review after it has been implemented. For example, the Sugar Code must be reviewed within 18 months of its commencement, and the Wheat Port Code must have its first review within three years of its commencement.
The review involves a public consultation process to seek feedback from a wide range of stakeholders. A review can be conducted by the Government Department with policy responsibility for the particular code or alternatively by an independent body or industry experts. The review may consider options for repealing the code or amending it.