Politicians and farmers have called on the competition watchdog to scrutinise milk industry issues, in the months since Murray Goulburn and Fonterra slashed prices and left farmers with massive debts.
Chairman Rod Sims says the ACCC will choose which major agricultural industry to review once it finishes examining the beef sector. The results of its market study into the beef industry are due in November.
While Mr Sims wouldn’t pre-empt the agency’s decision about which industry would be next in line, he said the dairy industry was «a very strong candidate».
«We’ll do a number of these [market] studies. If you think about the major agricultural areas, beef cattle is one, grain’s another, dairy’s another, horticulture, so [dairy is] right up there,» he said.
«But given the focus on a number of [dairy] issues at the moment, it’s certainly a very strong candidate.»
The ACCC is already investigating specific issues related to the dairy crisis, to determine whether suppliers engaged in misleading, deceptive or unconscionable conduct by slashing prices and clawing back the difference from farmers, leaving them with massive debts.
«Whereas with the current investigations we’re investigating whether the [Competition and Consumer] Act has been breached, market studies are absolutely not looking at breaches of the Act, although we might stumble across some.
«They’re looking at how well the market is functioning.»
Mr Sims said farmer and politician calls for the ACCC to look into pricing, contracts, trading and transparency in the dairy industry would likely be covered by such a study.
Beefing up collective bargaining
A review of existing collective bargaining provisions for dairy farmers would also likely be part of any market study, Mr Sims said.
Labor’s shadow agriculture minister Joel Fitzgibbon has called for dairy farmers to be given more power, and organisational infrastructure, to help them flex their collective muscle in contract negotiations with processors.
Mr Sims said the ACCC had already authorised a number of collective bargaining processes for farmers, and a market study would look at how well those were working.
He also pointed to collective bargaining changes recommended by the Harper review of competition law, which have been accepted by the government.
«[Those] would also potentially increase the muscle in the arm of people trying to collectively bargain, because they’ll make it just that much easier to think about whether it’s appropriate to have collective boycotts,» he said.
«This would allow for the potential for people not only to bargain collectively, but to put a position that says ‘unless we can reach agreement, we won’t supply you with milk’.
«That may or may not be something that people want to do, but it’s certainly one way the system could be strengthened.»
New ‘unfair contract’ laws a complicated issue for dairy
South Australian Senator Nick Xenophon called on the ACCC to clarify whether new laws to protect suppliers from «unfair» contract terms, which would take effect in November, would apply to dairy farmers.
Senator Xenophon said processors should be prevented from including ‘clawback’ clauses in dairy contracts, which this year were used to retrospective slash prices for farmers.
Mr Sims said that’s a complicated issue that the ACCC was yet to specifically consider.
He said the clauses have a long history in the sector, and are part of a mechanism that also allows for processors to increase, or ‘step up’, their prices through the year when times were good.
It’s highly unusual for processors to use that clause to cut prices, rather than increase them. This year was only the second time that has happened; the first was during the global financial crisis.
Mr Sims said there’s nothing that specifically rules dairy contracts out of being covered by the new laws.
«Dairy contracts came out of when these businesses were pure co-operatives and the co-operative wasn’t making any money, it was making sure it gave the farmers the biggest payout.
«Usually at the end of the year there’d be a slight upping in the price so that the co-operative didn’t make any money and all the money went back to the farmers, so it had a sort of innocent beginning.
«So with that history, how the contracts should be looked at in light of the new laws is something that should be thought about, and to be honest we haven’t done that yet.
«Our focus on dairy at the moment has been quite narrow with the investigations we’ve got going with Murray Goulburn and Fonterra.»
Source: ABC
Link: http://www.abc.net.au/news/2016-08-18/accc-says-dairy-a-strong-candidate-for-in-depth-review/7761784?WT.mc_id=newsmail&utm_content=39203475&utm_medium=social&utm_source=twitter
