Coles Group Ltd will pay Norco Co-operative Ltd $5.25 million following an investigation by the Australian Competition and Consumer Commission (ACCC).
It alleged that on 19 March, Coles announced (in media, marketing and in-store channels) the full benefit of a 10 cents per litre (cpl) retail price increase of its Coles branded 2 litre and 3 litre milk would be passed on to farmers.
The ACCC said its investigation focused on claims that when an unrelated 6.5 cpl increase commenced on 1 April 2019, Coles reduced its payments to Norco under the 10 cpl retail price increase from 10 cpl to 3.5 cpl.
Norco is a milk co-operative with 326 farmer members on 214 dairy farms in northern New South Wales and Queensland. It supplies milk to Coles for its branded milk as well as milk bearing the Norco brand.
ACCC chair Rod Sims said the commission was, “fully prepared to take Coles to court over what we believe was an egregious breach of the Australian Consumer Law. We believe we had a strong case to allege misleading conduct by Coles”.
Coles has committed to pay a lump sum to Norco for distribution to farmers within 7 days, which represents an additional 7 cpl base milk price increase for the period between 1 April to 1 December 2019.
Sims said Coles will then also pass on the additional 7 cpl to Norco farmers for the period 1 December 2019 to at least 30 June 2020 by increasing the base milk price paid to Norco for 2 litre and 3 litre Coles branded fresh milk by 7 cpl.
The additional 7 cpl is more than the 6.5 cpl amount which the ACCC alleges was not passed through to Norco farmers.
Accepting the commitment meant farmers would get the money within seven days. Court action would have taken “many months if not years” and would not have been guaranteed to reach the farmers, Sims said.
“We take commitments made to us very seriously. The ACCC will be keeping a very close eye on Coles to ensure they follow through on this commitment, and we are not ruling out future litigation if necessary,” Sims said.
Coles has committed to providing an independent audit report to the ACCC confirming that it has paid the full 7 cpl to Norco on Coles branded 2 litre and 3 litre milk from 1 April 2019 to 30 June 2020, and has also committed to working with Norco to verify that Norco has passed this through to farmers.
Norco’s CEO Michael Hampson said the payment was welcome as its members continued to deal with the severe drought.
“Norco has ensured all levy payments that it has received from Coles so far have been paid to farmers, and we will be making sure these additional proceeds get to our farmers as well as soon as possible,” Hampson said.
The ACCC understands Coles passed on the 10 cpl retail price increase to other dairy processors, it said.
Norco is #36 on our Australia's Top 100 Food and Drink Companies for 2019. It had moved up six places from #42 in 2018.