Lactalis Australia found in breach of the Dairy Code over missed deadline

Lactalis Australia Pty Ltd has been found in breach of the Dairy Code of Conduct in federal court proceedings brought by the Australian Competition and Consumer Commission (ACCC).

This was the first time the ACCC has commenced proceedings for alleged breaches of the Code, with the body alleging that Lactalis ‘breached a number of provisions of the Code, and, in doing so, weakened the bargaining power of farmers who supply milk to them’.

The court found that the dairy processor hadn’t published its milk supply agreements on its website by the Code’s deadline of 2pm on June 1, 2020. To obtain the information, farmers had to sign-up through a web portal.

Lactalis was also found to have breached the Code by publishing and entering into agreements that allowed the company to unilaterally terminate them in circumstances such as when the farmer had engaged in ‘public denigration’ of processors, key customers or other stakeholders.

ACCC deputy chair Mick Keogh said: “Farmers need to have access to timely information when making decisions about which processor to supply milk to. In breaching the Code’s requirement to publish its milk supply agreements by the deadline, Lactalis made it harder for farmers to compare milk prices and contract terms across different processors.”

He concluded: “This case should serve as a reminder to all dairy processors that failure to comply with the Code may result in ACCC enforcement action, including court proceedings, with serious consequences.”

A hearing on relief, including penalties, will be held at a later date.

The ACCC had also alleged that Lactalis had failed to publish genuine non-exclusive milk supply agreements – an allegation that the court dismissed. The dairy processor was also cleared of the allegation that it had failed to comply with the Code’s “single document” requirement, which is intended to provide a single source of farmers’ obligations. The ACCC had argued that Lactalis hadn’t provided all three documents that made up its milk supply agreement ‘in a majority of cases’.

What is the Dairy Code?

 The Dairy Code of Conduct is a mandatory industry code in Australia regulating the conduct of farmers and milk processors in their dealings with one another.

Under the Dairy Code, a processor must, by 2:00pm on June 1 each year, publish on its website one or more standard form milk supply agreements; and, for each standard form milk supply agreement, a statement setting out the circumstances in which the processor would enter into the agreement.

For every exclusive milk supply agreement a processor publishes, a processor must also offer a non-exclusive supply option to farmers. The Dairy Code requires processors to only purchase milk under a milk supply agreement. All agreements must comply with the code by meeting a number of key requirements, including:

• specifying a minimum price paid for the milk;
• consisting of a single document;
• specifying quality and quantity requirements, including testing procedures; and
• specifying the circumstances in which parties may unilaterally terminate the milk supply agreement - for processors to unilaterally terminate, the circumstances outlined must involve a ‘material breach’ by the farmer.

The publication obligations of the Dairy Code apply to all processors with an annual aggregated turnover of AU$10m or more in the previous financial year.