ACCC now targeting Unfair Contracts

Apr 07, 2017

The new unfair contract terms law is a priority for the ACCC in 2017. It will ensure small businesses, including those which are farms, receive the right type of protection.

We have been advised that the ACCC will be taking enforcement action against a number of companies across a range of industries over business-to-business unfair contract terms this year.

For the past six months, ADF together with State Member Dairy Organisations and Processor Members of the ADPF have been working on the Code of Practice for contractual agreements between farmers and processors. The development of this code is instrumental in protecting dairy farmers from unfair clauses and protecting our processors from incurring millions of dollars in fines. Now with full industry support, the Code of Practice is due to be finalised shortly.

The ACCC has reinforced the importance that if you operate a small business, you may be required to enter into standard form contracts with other businesses for goods and services. All dairy farmers should check the contracts they have with suppliers of inputs, like grain, to ensure they conform to the new legislation. The Australian Consumer Law now prohibits unfair terms in most of these contracts.

In their communications, the ACCC stated that it was no secret that traders (typically larger businesses) put potentially unfair clauses in their agreements, such as terms that give them:

  • an unreasonable ability to cancel or terminate an agreement
  • broad and potentially unreasonable powers to protect themselves against loss or damage
  • the ability to unilaterally change the terms of the contract
  • unilateral discretion to reject or downgrade produce
  • an unreasonable ability to limit or prevent small businesses from exiting their contracts. 

To be 'unfair', a term must:

  • cause a significant imbalance in the parties' rights and obligations
  • not be reasonably necessary to protect the legitimate interests of the party advantaged by the term, and
  • cause financial or other detriment (such as delay) to a small business if it were relied on. 

If you come across terms in a standard form contract you have been offered or you have entered into, and which you think may be unfair, you can report it to the ACCC Infocentre

For more information, including the definition of a small business and the meaning of 'unfair' contract terms, please see the ACCC website

John McQueen

Interim ADF Chief Executive Officer

 

Lessons learnt from the Senate Inquiry

Feb 09, 2017

Last week ADF were asked to speak at the Senate Inquiry in Shepparton, Victoria.

Before it was our turn, we listened to a number of dairy farmers from the region offer valuable insight into an industry that has seen its fair share of hard knocks.

Centred around a few general themes, the dairy farmers talked about having greater transparency between processors and suppliers, contract fairness, and a lack of faith with industry body leadership.

Firstly, we believe that the dairy industry needs improved contracting arrangements between farmers and processors; greater transparency through earlier and clearer pricing signals for farmers; and less risk for farmers and more balance in risk along the supply chain.

In relation to greater transparency, ADF is in the final stages of completing the draft Code of Practice. We have worked in consultation with our state member organisations, farmers and processors, and the ADIC to develop a Dairy Industry draft Code of Practice for contractual arrangements to help ensure greater transparency and fairness in milk supply and pricing. This will also minimise the chances of what happened in April/May last year being repeated.

ADF believes that it is important that contracts are fair, simple, realistic and easily understood by both parties ensuring there is more balance for farmers along the supply chain. The Code of Practice will help ensure that supply agreements and contracts comply with the Unfair Contracts law that came into effect on 12 November 2016.

This unfair contracts legislation extends existing protections against unfair contracting practices and is a practical step, that when coupled with the dairy industry Code of Practice, will provide dairy farmers with fairer and more transparent contracts.

ADF will continue to work with farmers, processors and our industry bodies to build a system that builds resilience, rather than leaving farmers vulnerable.

Lastly, while it is important to acknowledge the things we do well as an industry it is also important to recognise the things that we could do better. The farmers have spoken and we have listened.

While we are busy working on and achieving important outcomes for farmers, a lot of work goes on behind the scenes that we don’t often communicate to our members well enough. We hear this and are endeavouring to do better.

It’s also important to note that the ACCC Inquiry into the Dairy Industry has started. If you are a dairy farmer and can attend one of the public forums the ACCC needs to hear from the ‘horse’s mouth’. The key issues to be considered in the Inquiry include competition between milk processors, the effects of private label products and pricing, contractual practices, availability of price, global markets and key factors influencing the profitability of dairy farms.

 

The next public forums will be held on:

  • Tuesday 14 February 2017, Traralgon, VIC
  • Monday 27 February 2017, Warrnambool Golf Club, Warrnambool, VIC
  • Tuesday 28 February 2017, Shepparton Golf Club, Shepparton, VIC
  • Thursday 16 March 2017, Mercure Sanctuary Golf Resort, Bunbury, WA
  • Monday 20 March 2017, Hahndorf Football Club, SA
  • Wednesday 22 March 2017, Burnie Golf Club, Camdale, TAS

 

For more information and to register your interest please visit https://consultation.accc.gov.au/compliance-enforcement/accc-dairy-inquiry-farmer-consultation-forums/

John McQueen

Interim ADF Chief Executive Officer

 

Making Sense of the ACCC Inquiry

Sep 02, 2016

The symposium was a great opportunity to facilitate a discussion around how better to manage risk along the dairy supply chain, including managing the effects of world dairy prices.

A number of topics were covered including the outlook for the Australian dairy industry and options for improving milk price transparency, strengthening bargaining and restoring industry confidence.

One important outcome of the symposium was the announcement by Deputy Prime Minister and Minister for Agriculture and Water Resources Barnaby Joyce regarding the upcoming Australian Competition and Consumer Commission (ACCC) inquiry into the national dairy industry.

The inquiry under Part VIIA of the Competition and Consumer Act 2010, has provided the Commission with additional powers to obtain information from the entire value chain. What this means is the ACCC has been given extra investigatory control to undertake the inquiry, with the authority to dig deeper than it would have been able to in a market study.

Already investigating specific issues related to the dairy crisis, the ACCC will have the power to determine whether suppliers engaged in misleading, deceptive or unconscionable conduct by slashing prices leaving some dairy farmers with massive debts.

The inquiry will investigate sharing risk along the supply chain, supply agreements and contracts, competition, bargaining and trading practices in the industry and the effect of world retail prices on profitability.

Dairy farmers deserve fair returns at the farm gate, as well as transparency in milk price arrangements and supply contracts. ADF believes that the ACCC inquiry is a thorough and fair way to uncover inefficiencies and inequities that farmers face; and helps to identify a way forward.

From what we have been told the ACCC will release an issues paper and engage with stakeholders through public and private hearings starting in November. We encourage everyone in the dairy industry to contribute to the inquiry to ensure the ACCC gets the information it needs. There will also be confidentiality arrangements in place to protect commercial interests.

After the stakeholder engagement meetings, we will be encouraged to provide written submissions to the ACCC before they deliver a final report to government in the second half of 2017.

This inquiry will shed some light on the bigger picture by analysing the broader dairy industry to identify structural and behavioural issues that affect the industry’s performance. By engaging with stakeholders, the ACCC will have a better chance of identifying and understanding the key issues in the industry and we look forward to being a part of the solution.

Further information about the inquiry, including about how you can be involved, will be made available following the receipt of a Terms of Reference from the Treasurer.

The government will continue to work with dairy farmers and processors to strengthen the industry, including our election commitment of up to $2 million to establish a commodity milk price index, while the ACCC’s findings from this inquiry will be a vital source of information when looking at options for the index.

Further information on the ACCC’s inquiry, including its terms of reference, will be made available at www.accc.gov.au/agriculture shortly.

David Basham

Acting ADF President

 

Important Outcomes From The Symposium

Aug 26, 2016

The symposium was held yesterday in Melbourne and both the Australian Dairy Farmers CEO John McQueen and myself attended.

Firstly, I would like to thank the Deputy Prime Minister and Minister for Agriculture and Water Resources, Barnaby Joyce for organising and chairing the symposium as well as other government officials who were in attendance.

I would also like to thank our state members - QDO, NSWFarmers, SADA, TFGA, UDV, WAFarmers and industry partners for their work prior to the symposium which gave us the opportunity to narrow our message down to focus on four important key areas.

Lastly I would like to thank the processors and retailers who were at the symposium to hear from concerned farmers, owners of small businesses and people who produce a quality product that many people in Australia rely on.

For me, the symposium provided an opportunity for the dairy industry to have an open discussion with key stakeholders to address the challenges facing the Australian dairy industry.

Our main points include no $1 milk, no late season drop in milk price, fairer contracts, commodity milk price index with an educational program and critical need for farmers and manufacturers to find the solutions rather than depend on government.

These points illustrate the need by industry to ease the pressure placed on farmers by having to accept an unfair share of the risk and possible financial fall-out. We believe in greater transparency and look forward to working with the government on establishing the commodity price index tool which will help tip the balance back to the farmer.

Since 2011, we have said that the $1 milk devalues the product by taking substantial value out of the supply chain and has to stop if we are going to maintain a sustainable industry. There needs to be greater fairness in contracts and we have committed to working with processors to ensure all contracts comply with the unfair Contracts Legislation that begins on November 12, 2016. Also, the situation in Western Australia needs to be addressed immediately as we don’t believe it’s right that nine farmers may not have anywhere to take their milk.

In response, Minister Joyce urges the need for industry to work together to better balance risk along the dairy supply chain, especially when it comes to managing the effects of lower world prices. He wants to see improved Farmgate returns for dairy farmers, an openness in milk price arrangements and fair and transparent milk supply contracts; plus, the development of a commodity milk price index which he committed up to $2 million in government funding to establish. Also, for industry to find a compromise to the $1 milk situation otherwise he will need to take action and push for an immediate solution.

However, he also acknowledged that these things will only happen if there is buy-in from industry and a willingness from key stakeholders to hear each other out and develop solutions together.

A surprise announcement made by Minister Joyce at the conclusion of the symposium advised that Treasurer Scott Morrison has request the ACCC to undertake an inquiry under Part VIIA of the Competition and Consumer Act 2010 providing the Commission with powers to obtain information from the entire value chain. What this means is the ACCC has been given extra investigatory powers to undertake the inquiry, with the authority to dig deeper than it would have been able to in a market study. The inquiry, which will begin in November, will investigate sharing risk along the supply chain, supply agreements and contracts, competition, bargaining and trading practices in the industry and the effect of world retail prices on profitability.

Yesterday’s dairy symposium delivered on Minister Joyce’s election promise to get key stakeholders together to address challenges facing the Australian dairy industry and discuss ways to improve the industry’s prospects going forward.

One of the ways the Coalition Government is delivering assistance to dairy farmers is with a $579 million support package to help manage through the current low price environment. The funding been allocated to four main areas including access to Dairy Recovery Concessional Loans, Farm Household Allowance (FHA), the Rural Financial Counselling Service and an additional $900,000 for Dairy Australia to roll out ‘Tactics for Tight Times’ one-to-one farm business advice.

If you have any questions relating to whether you are eligible for the concessional loans, the government has released a dairy question and answer section on their website (click here). However, we suggest that you also contact a financial counsellor or the relevant state delivery agency as they will be able to help you with information and the application process.

 

David Basham

Acting ADF President


 

 

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