Lactalis Australia has been ordered by the Federal Court to pay $950,000 in penalties for contravening the Dairy Code of Conduct.
The Dairy Code, which came into effect on 1 January 2020, is a mandatory industry code regulating the conduct of dairy farmers and milk processors in their dealings with one another. Lactalis failed to meet some of its obligations in relation to the 2020-21 milk season.
Following proceedings brought by the ACCC, the Court found in September 2022 that Lactalis had breached the Dairy Code by publishing and entering into agreements that allowed Lactalis to unilaterally terminate an agreement in circumstances that didn’t involve a material breach by farmers. In particular, under the agreement, Lactalis was permitted to unilaterally terminate the agreement when, in Lactalis’ opinion, the farmer had engaged in “public denigration” of processors, key customers or other stakeholders.
The Court has found clauses like these strike at the Code’s “essential objective”, and, although there was no evidence of any actual harm suffered, it was possible it had “a chilling effect on the farmers who were subject to it”.
“We took action because we considered Lactalis’ conduct would reduce transparency in the industry and served to perpetuate systemic bargaining power imbalances between processors and farmers,” says ACCC Deputy Chair Mick Keogh.
The Court also found that Lactalis had breached the Code by “failing to publish its milk supply agreements on its website”. It, instead, required farmers to sign up to receive their milk supply agreements by email.
“The Code was introduced to help dairy farmers make informed choices about where they sell their milk by ensuring there is transparency in pricing agreements and by allowing them to compare agreements from different processors in a timely fashion,” says Mr Keogh.
“These were the first contested proceedings under the Dairy Code and the outcome is an ongoing reminder that processors who fail to comply with the Code may face significant penalties.
“Ensuring that small businesses receive the protections they are entitled to under industry codes continues to be one of the ACCC’s enduring compliance and enforcement priorities.”