ACCC

Explainer: What the ACCC means by…

/ dairymilkmaid / 2 Comments
ACCClogo
After the ACCC announced today that it was taking MG and two of its former big bananas – MD, Gary Helou, and CFO, Brad Hingle – to court, Milk Maid Marian asked the competition watchdog to explain a few things. I’m very grateful to the ACCC for responding so swiftly. 
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MMM: The ACCC is seeking orders against Murray Goulburn that include declarations, compliance program orders, corrective notices and costs. What do all these terms mean and can you offer any examples of what the declarations, orders and notices might look like or the form they could take?

ACCC: A declaration is an order from the Court stating that the conduct breaches the law, in this case -the Australian Consumer Law (ACL). This provides guidance to the ACCC and to businesses about what future conduct may be found in breach of the law.

Compliance programs can include requiring company directors to undergo training in the requirements of the CCA and the Australian Consumer Law.

Corrective notices can include notices printed online or in local newspapers alerting affected parties as to the Court’s findings of a breach of the law.

The Court can order that one party pay costs, or split costs, (such as the fees and other expenses a solicitor charges for providing of legal services, such as court fees.), if the court considers that party to be at fault.

The ACCC is also seeking disqualification orders against Mr Helou and Mr Hingle. A disqualification order can prevent a person from managing corporations for a period the court considers appropriate

MMM: Why is MG’s board of directors not included in the ACCC’s action?

The ACCC has taken action against former managing director Gary Helou and former chief financial officer Bradley Hingle, as it considers that they were knowingly concerned in Murray Goulburn’s conduct.

MMM: How long do these proceedings of this kind usually take?

Court proceedings can become lengthy, and matters can run in excess of 12 months. The ACCC cannot speculate how long this proceeding take to conclude.

MMM: What does the ACCC consider would be the magnitude of an appropriate pecuniary penalty for Helou and Hingle?

The ACL allows for pecuniary penalties for individuals of up to $220,000 per contravention. It is up to the court to determine the penalty to be imposed on the parties.

MMM: The ACCC is not seeking pecuniary penalties against MG but what is the likely scale of the costs it might face if the ACCC is successful?

The ACCC cannot speculate. It is determined, in part, by the length of the case.

MMM: Trade practices lawyer Michael Terceiro tweeted today that “ACCC sues Murray Goulburn – looks risky trying to dress-up a misleading & deceptive case as unconscionable conduct”. What is the difference between the two and why is the ACCC opting for unconscionable conduct rather than misleading and deceptive conduct?

It is noted that the ACCC is alleging Murray Goulburn engaged in unconscionable and misleading or deceptive conduct, and made false representations.

The ACL prohibits misleading or deceptive conduct, and making false or misleading claims.

The ACL also prohibits unconscionable conduct such as particularly harsh or oppressive behaviour that goes against conscience as judged against business and social norms and standards.

There are a number of factors a court will consider when assessing whether is unconscionable.

These include:

  • the relative bargaining strength of the parties
  • whether any conditions were imposed on the weaker party that were not reasonably necessary to protect the legitimate interests of the stronger party
  • whether the weaker party could understand the documentation used
  • the use of undue influence, pressure or unfair tactics by the stronger party
  • the requirements of applicable industry codes
  • the willingness of the stronger party to negotiate
  • the extent to which the parties acted in good faith.

This is not an exhaustive list and it should be noted that the court may also consider any other factor it thinks relevant.

MMM: Fonterra Australia will not be pursued by the ACCC because it signalled the possibility of price falls early. Did it consider the retrospective nature of the drop, the lack of notice and the levying of interest on farmers who did not opt to take loans?

The ACCC considered all issues raised during its investigation.  After assessing all of the information provided, the ACCC considers Fonterra Australia was more transparent about the risks and potential for a reduction in the farmgate milk price from quite early in the season.

Thanks again to the ACCC for this explainer.

ACCC takes Helou, Hingle and MG to court but lets Fonterra off the hook

/ dairymilkmaid / 2 Comments
eleanor-roosevelt

Pic credit: The Solution News at TSNnews.com

Today, the ACCC announced that it is taking Murray Goulburn to the Federal Court for unconscionable conduct. It will also pursue MG’s former MD, Gary Helou, and CFO, Brad Hingle.

That’s a bit of a relief after Gary Helou told the Senate Inquiry in February that he had not been questioned by investigators. If there’s a villain in the whole dairy disaster we can all agree on, it is Gary Helou. I, for one, am glad he will have his day in court.

I am also relieved the ACCC has shown the wisdom of Job when dealing with MG. As the ACCC said in its statement:

“The ACCC has decided not to seek a pecuniary penalty against Murray Goulburn because, as a co-operative, any penalty imposed could directly impact on the affected farmers.”

On the other hand, many farmers will be disappointed the ACCC has chosen not to take any action against Fonterra. The watchdog explained that decision in a quote from ACCC chairman, Rod Sims:

“A major consideration for the ACCC in deciding not to take action was that Fonterra was more transparent about the risks and potential for a reduction in the farmgate milk price from quite early in the season,” Mr Sims said.

Rod Sims is right. Fonterra did say, more than once and from early on in the season, that the milk price was unsustainably high. Why, I was one of the farmers upset with Fonterra big banana, Theo Spierings, for broadcasting this via the newspapers eight months before the price collapse. That much, I do understand and, with the benefit of hindsight, Fonterra was doing the right thing.

Theo

Fonterra was in an impossible position. While, technically, Fonterra could have cut its price earlier and, therefore, less savagely, the reality was that it had little choice. It would have haemorrhaged supply to MG and, if the co-op had delivered on its promises, the Bonlac Supply Agreement would have forced Fonterra to match MG’s price – no matter how unrealistic – anyway.

What it does not excuse, however, is the way Fonterra responded once MG announced its price cut.

At first, Fonterra sat on its hands, apparently caught by surprise like the rest of us. Then announced a slashing of the milk price from $5.60 to $1.91kg MS – the equivalent to 14 or 15 cents per litre. It gave no notice – actually, it revised the price for May and June on May 5. There was no time for farmers to plan and we were all faced with a frenzy of late-night nightmarish decision making.

On top of that, the Fonterra response failed to consider the devastating effect it would have on farmers with autumn-calving herds. Fonterra moved the goalposts a week later to spread the pain more evenly across its farmer suppliers but, for those who’d been most responsive, it was too late. Cows had been culled and the decision to send milkers to market is absolutely final.

Even now, farmers who chose not to accept the low-interest loans Fonterra offered to partially fill the void are still paying a mandatory levy to fund the scheme.

The weeks of insanity in May and the pain it continues to wreak on farmers cost Fonterra Australia loyalty that took it decades to build, as Australian GM of Milk Supply, Matt Watt acknowledged in this excerpt of an email to suppliers just minutes ago:

  • “You will have seen today that the ACCC released its findings into their investigation into MG and Fonterra over last season’s step down. The ACCC advised that they have decided not to take action against Fonterra.”

  • “I know the last 12 months have been incredibly challenging for you and your families, your communities and our industry.

  • “We’ve listened to you, and we’ve learned a lot over the past year. What you’ve told us has informed the steps we’re taking to ensure a stronger dairy industry.

  • “As you know, we’re working with BSC Board on greater transparency on price and as mentioned earlier I look forward to sharing more on that at the upcoming cluster meetings. We’re also fully engaged in the Dairy Industry Code of Conduct.

  • “We understand it will take time to rebuild confidence, and this is something we are firmly committed to.”

Neither of the two big Australian processors covered themselves in glory a year ago.  At least we now have some prospect of justice, if not recompense, for all the farmers affected by the reckless behaviour of the man at MG’s helm that sent so many to the rocks.

It’s a sign – a good sign – that the dairy community will chart a better course and keep a closer watch in the years to come.

Helou tells the Senate he’s a hero

/ dairymilkmaid / 4 Comments

While he might not have used the word “hero” exactly, former Murray Goulburn managing director Gary Helou was in complete denial when he fronted the Senate inquiry today.

Helou told senators he had the right plan, a plan that had delivered for two-and-a-half years. “The strategy was working and we were getting the right results,” he railed. Only one “unforeseeable” thing had derailed MG’s plans. That thing?

Not the global dairy commodity prices that had been falling steadily for month after month or the inattention of the board to the reportedly growing alarm of senior management. It was a Chinese regulatory change regarding cross-border trade via e-commerce. I gather this is code for selling milk powder and UHT milk on the equivalent of eBay into China.

As Gary explained it, he and the board were aware of the falling global commodity prices but selling these dairy foods – which he described as “our biggest sellers” – had been mitigating those losses.

The Chinese seemed to be tightening up on that, err, “cross-border e-commerce” and MG made two ASX announcements in response to media reports, the first on April 12, followed by this update on April 18.

mgcasxapril18

Both announcements concluded that the regulation did “not have a material impact on MG’s business”. Totally in contradiction to everything Gary Helou said today.

Just four days later, MG entered a trading halt. When it emerged from that trading halt on April 27, here’s what the announcement said about those big sellers:

asxmgcapril27

MG was still saying the Chinese announcement had no material impact on MG’s business. So, where does the truth lie?

With MG facing at least one class action, the Senate inquiry and under investigation by both the ACCC and ASIC, farmers have been hopeful of finding answers to the debacle that cost some their livelihoods.

But asked twice by senators whether he had been questioned by authorities investigating if MG had misled investors, Gary Helou said “no”. Both times he paused for several seconds before answering that one very simple question and, incredibly, each time it was an unequivocal “no”.

This is one witness to the Senate Inquiry who raised more questions than were answered.

United Dairy Farmers of Victoria president, Adam Jenkins summed up the sense of disbelief that followed perfectly. If it was possible, the ACCC farmer consultation forums that roll into town over the next couple of weeks just got that bit more important to attend.

adamjenkinsheloutweet

 

 

Dairy pawn

/ dairymilkmaid / 9 Comments

Image from http://enos.deviantart.com/art/Cow-Chess-1353853 by enos of Deviant Art

These days, I feel a little like a chess piece; more pawn than queen.

The Australian federal government has rushed into a free trade agreement with Japan that does next-to-nothing to help Aussie dairy break through tariff barriers, even though Japan is hardly known for a growing dairy industry of its own that deserves protection. I don’t know why we were overlooked but a Sydney Morning Herald story quotes Warren Truss as citing “compromises”.

It’s been an interesting few days for dairy. Coincidentally, the ACCC forced supermarket superpower, Coles, to confess that it was lying when it claimed the $1 milk had not hurt dairy farmers.

At the same time, the media is littered with references to milk as “white gold” and so on, while our co-op, Murray Goulburn, contemplates a partial sell-off to raise capital.

And the milk maid? Yes, I’ve almost recovered financially from last year now but not emotionally.

A Kiwi who’s now dairy farming here in Victoria tells me that one of the differences he’s noticed is that there’s just not the “buzz” around our farmers in a good year that you get in NZ.

Why? First, we’re more battle-weary and risk averse after a decade of drought knocked us around. Second, we’re rightly a little more cynical. In NZ, dairying gets a lot of encouragement from a government that understands dairy’s huge economic impact on the entire nation. The sector accounts for about 3% of NZ’s GDP. Have a look at this economic statement:

“Rebounding dairy production drove a 1.4 percent increase in gross domestic product (GDP) for the September 2013 quarter — the biggest quarterly increase since December 2009, Statistics NZ (SNZ) said.”
– The New Zealand Herald, 19 December 2013

Here in Australia, the dairy sector contributes $13 billion to our economy but that’s considered small fry, accounting for less than 1% of our GDP, which totalled $1451.1 billion in 2011–12.

If we are to realise our potential, we need a government that helps dairy grow rather than considering it as a tradeable concession. All eyes are now on the FTA negotiations with China.

MG makes its move

/ dairymilkmaid / 7 Comments

I used to think of our co-op as a bit like the ABC: your favourite aunty. Comfortable, dowdy, trustworthy and a little quirky.

But Aunty MG has undergone a transformation.

Since it acquired a new CEO, Gary Helou, in October 2011, Murray Goulburn has embarked on lancing $100 million of costs, opened up in Dubai, restructured the way farmers are paid for milk, revamped its retail trading store network, developed assistance packages for the next generation of farmers and forged the spectacular Coles fresh milk deal. At least, these are the “headline acts” that come to mind.

Now, MG is making a $420 million bid for its rival, Warrnambool Cheese & Butter, gazumping Bega Cheese and Canadian dairy giant, Saputo.

According to MG, (if the bid is successful) the new Murray Goulburn Warrnambool:

“Creates a new 100% Australian farmer-controlled dairy food company with over 3,000 supplier shareholders delivering more than 4 billion litres of milk to nine processing sites annually. The business will be positioned for strong growth in both domestic and international dairy markets with forecast revenues in financial year 2014 of $3.2 billion including export sales of $1.4 billion to over 60 countries.”

This, Gary Helou wrote in a letter to MG’s farmer shareholders yesterday, would bring the coop, “…the necessary scale, market reach and competitive strength to capture the benefits of the historic growth opportunity resulting from the consumer affluence of developing Asian economies.”

MG’s triple-jump

The bid is in, it’s the most lucrative on offer and it’s Australian, yes, but there are three serious hurdles for MG:

1. A bidding war

What will Saputo and Bega do next? WCB traded higher yesterday, closing at $7.89, a sign that markets believe MG’s $7.50 isn’t enough to win the bidding war.

2. Shareholder seduction

WCB rejected a takeover offer from MG in 2010. At the time, there was quite a bit of anti-MG sentiment. It’ll be interesting to see if the reinvention of Aunty and a bigger bucket of cash will make a difference.

The Sydney Morning Herald reported Mr Helou said yesterday that farmers supplying WCB needed to consider the future of the Australian dairy industry when deciding on the take-over bid.

“For farmers generally, they are at a fork in the road today.”

“If they sell out to a private company, that they have no control over … they will be spectators.”

“What we are putting on the table is an offer for them to take a stake in every step in the value chain.”

“It’s a fundamental, philosophical different point of view.”

3. The competition watchdog

Back in 2010, the ACCC was loathe to allow MG to acquire WCB. As reported in the SMH at the time:

THE competition regulator says its preliminary view is to oppose Murray Goulburn’s proposed acquisition of Warrnambool Cheese & Butter on the grounds it would cut competition in some markets for raw milk.

The Australian Competition and Consumer Commission said yesterday it was concerned the proposed deal “would substantially lessen competition for the acquisition of raw milk from farmers in the relevant markets within South Australia and Victoria”.

“The potential effects in the relevant markets include a significant reduction in farm-gate prices paid to farmers for raw milk; and reduced competition in the offer of non-price terms such as finance, field advice services and discounted hardware and grain supplies.”

The irony of the ACCC’s 2010 statement is that Murray Goulburn’s mission, as a 100% farmer-owned co-operative, is precisely to return the maximum price to farmers — something to which the listed Bega Cheese nor the privately owned Canadian giant Saputo cannot lay claim.

I hope it takes a broader perspective this time. A serious exporter battling subsidies and tariffs around the world, MG needs scale so that its processing can be as efficient as its farmers. The Australian government does not afford our dairy farmers the protections enjoyed by most of our competitors. The least it can do is allow us to grow.

UPDATE: See this article and extended AFR interview with MG CEO Gary Helou: http://www.afr.com/p/national/the_battle_for_warrnambool_kxxm78XXLgfsAJ6y7ARaVJ

Quad bike manufacturers look like Big Tobacco

/ dairymilkmaid / 2 Comments
Quadbar

Crush protection devices will save farmers' lives

Just like Big Tobacco before it, the quad bike industry has been adamant its machinery is not responsible for the deaths of Australian farmers – rather that they got themselves killed.

The Weekly Times and SafetyOzBlog have reported the gyrations of the manufacturers and their representatives, the FCAI, which even included forcing some sponsored riders to remove crush protection devices. They claimed that the only answer was more rider education and that rider error was almost invariably the cause of the 23 deaths on farm ATVs in 2011 so far.

I thought it was all over bar the shouting match when The Weekly Times reported that the FCAI had dropped its opposition to Australia’s crush protection device, the Quadbar. Then I heard that at least one manufacturer has advised its dealers that its position is unchanged.

Now, the SafetyOzBlog carries this media release from the respected and independent Australian Centre for Agricultural Health and Safety tearing strips off the FCAI for failing to correct what the ACCC described as misleading and deceptive conduct.

“Embarrassing or not, the families of those people killed and permanently injured in such rollover events have a right to know why the FCAI, as suggested by the ACCC, has not only misrepresented the evidence but why they have not addressed this issue in a timely manner. The inaction and questionable approach of both the FCAI and manufacturers is showing complete disregard for the safety of their customers.”

People on our farms are dying. No matter who is responsible for the rollovers, the Quadbar is estimated to protect between one in four and one in three people. It’s worth it.

For more information on quad bike safety, call the Australian Centre for Agricultural Health and Safety (02 6752 8210) or visiting the website at www.aghealth.org.au