The Federal Court has ordered Lactalis Australia Pty Ltd to pay $950,000 in penalties for contravening the Dairy Code of Conduct by failing to meet some of its obligations in relation to the 2020-21 milk season.
Following proceedings brought by the ACCC, the court found in September 2022 that Lactalis had breached the Dairy Code by publishing and entering into agreements that allowed Lactalis 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.
On July 25 the court found clauses like these strike at the Dairy Code’s essential objective, and, although there was no evidence of any actual harm suffered, it was possible it had “a chilling effect on the farmers who were subject to it”.
“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.
The court also found that Lactalis had breached the Dairy 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.
“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.
“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.”
eastAUSmilk CEO Eric Danzi said it was positive to see the ACCC was enforcing the code where there were breaches, including taking court action against processors.
“This is a reminder to all processors to ensure they act responsibly and adhere to the code or the ACCC could take action against them,” Mr Danzi said.
“A review of the Dairy Code is due to occur by the Federal Government in the next year and it is time to tighten the code to ensure that the code is effective and that any loopholes are closed.
“Issues such as minimum pricing in long-term contracts and the effectiveness of the grocery code are issues that need to be reviewed.”
The ACCC said Lactalis was one of Australia’s largest dairy processors and purchases 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.