The ACCC said WCB’s contracts with farmers contained terms that allowed it to unilaterally vary the milk price and other milk supply terms, with the farmer unable to terminate the milk supply agreement early without incurring a financial penalty.
WCB, which is owned by Canadian company Saputo Inc., has contracts that also placed restrictions on farmers selling their farm and required farmers to indemnify WCB for loss that could be avoided or mitigated by WCB, the ACCC said.
WCB acted promptly and agreed to take steps to address the ACCC concerns. WCB agreed it would not impose a penalty on any farmer who terminates their milk supply agreement before the expiration date, it would not unreasonably withhold consent from a farmer wishing to sell their farm, and it would narrow the scope of the indemnity required from farmers.
Finding a solution
WCB has written to farmers who operate under these milk supply agreements to advise them of the changes to the agreement. WCB will also make the relevant changes to its milk supply handbook for the 2018/2019 season.
“Unfair contract terms in milk supply agreements have the potential to harm dairy farmers and their businesses,” ACCC deputy chair Mick Keogh said.
“WCB has worked with the ACCC to find a solution that balances the farmers’ rights under the milk supply agreements and addresses the ACCC’s concerns about potentially unfair contract terms.”
The ACCC recently conducted an inquiry into the competitiveness, trading practices, and transparency of the Australian dairy industry. The ACCC submitted its final report to the Treasurer in April 2018, which included a key recommendation that a mandatory code of conduct be implemented to improve contracting practices between dairy processors and farmers.