Lactalis Australia has been slapped with a $950,000 fine for contravening the Dairy Code of Conduct by failing to meet some of its obligations in relation to the 2020-21 milk season.
The French-owned company — which in WA processes Harvey Fresh-branded milk —was taken to court by the Australian Competition and Consumer Commission in July 2021 over what was then alleged breaches to the Dairy Code of Conduct.
The ACCC took the company to task claiming it had breached a number of provisions of the code, and, in doing so, weakened the bargaining power of the farmers that supplied its milk.
ACCC deputy chair Mick Keogh said it believed the dairy giant’s conduct would “reduce transparency” in the industry, and “served to perpetuate systemic bargaining power imbalances between processors and farmers”.
“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 processors in a timely fashion,” he 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.
“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.”
The Federal Court found Lactalis had breached code by publishing and entering into agreements that allowed it to unilaterally terminate an agreement in circumstances that didn’t involve a material breach by farmers.
In particular, under the agreement, Lactalis was permitted to unilaterally terminate the agreement when — in Lactalis’ opinion — the farmer had engaged in “public denigration” of processors, key customers or other stakeholders.
The Federal Court this week determined that although there was no evidence of any actual harm suffered via that specific agreement term, it was possible it had “a chilling effect on the farmers who were subject to it”.
It also found Lactalis had breached the code by failing to publish its milk supply agreements on its website, and instead required farmers to sign up to receive their milk supply agreements by email.
Lactalis is one of Australia’s largest dairy processors and purchases milk from more than 400 dairy farmers across all States, producing a wide range of dairy products across a number of brands including Pauls, Oak, Vaalia and Ice Break.
The Dairy Code is a mandatory industry code regulating the conduct of dairy farmers and milk processors in their dealings with one another that came into effect on January 1, 2020.
It was brought in to to promote fair trading in the dairy industry by imposing minimum standards of conduct on farmers and processors after years of alleged mistreatment of farmers by corporate processors.
WA’s $190 million dairy industry has faced its fair share of challenges — including deregulation in 2000, $1/L milk, several farmers not getting their contracts renewed in 2016 — and has lost more than 30 of its 150 farmers in the past five years.
Under the Code, a processor must publish its standard form milk supply agreements on its website by 2pm on June 1 each year.
For every exclusive milk supply agreement a processor publishes, a processor must also offer a non-exclusive supply option.