Australia’s dairy industry will see the introduction of a mandatory code of conduct from 2020, as announced today by the Australian Competition and Consumer Commission. It aims to address systemic problems within the industry, highlighted in the ACCC’s 2018 dairy inquiry.

In 2016, the ACCC was directed by then-treasurer Scott Morrison to hold an inquiry into the competitiveness of prices, trading practices and supply chain in the Australian dairy industry.

The final inquiry, released in April 2018, found “significant imbalances” in bargaining power at each level of the dairy supply chain. A mandatory code of conduct was a key recommendation as part of the report.

“Our dairy inquiry identified that imbalances in bargaining power between processors and farmers has allowed processors to transfer much of their risk onto farmers,” ACCC deputy chair Mick Keogh said.

"We also identified a lack of transparency in contract and pricing practices, limiting the ability of farmers to compare offers from different processors and hence reducing competition.”

“We concluded that a mandatory code was the best way to address these systemic industry problems, so we are pleased to see that this has become reality.”

Keogh said the ACCC will be working with dairy farmers and processors as the new code is implemented, as well as the members of a new Dairy Consultative Committee, “to help ensure a smooth implementation”.

Up to $10 million in federal grants

At the announcement in Canberra today, Agriculture Minister Bridget McKenzie said $10 million in grants will be available to dairy famers to upgrade or invest in energy efficient equipment to reduce energy costs, as well as investing $8.1 million in additional funding to the ACCC’s Agriculture Unit, and establishing a dairy specialist.

McKenzie said Australia’s dairy farming organisations had worked hard to develop a Code that would support dairy farmers right across Australia.

“The final Code is different from the draft that was consulted on and is now a stronger, clearer document that delivers the protections it should for dairy farmers," she said.

“In line with feedback received from dairy farmers the Code prohibits retrospective pricing step downs. It also prevents unilateral changes except in a narrowly defined set of emergency circumstances; it stops processors withholding loyalty payments from farmers who are changing processor; and it prohibits exclusive supply arrangements where other conditions would be to the detriment of dairy farmers.

“It also establishes a dispute resolution process, increases the powers of the Australian Competition and Consumer Commission in the space and introduces civil penalties."

The ACCC will enforce the mandatory code from 1 January 2020, with a review of the code’s role, impact and operation to take place after 12 months.

The Department of Agriculture has listed the dairy code of conduct on its website, which can be accessed here.

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