That prompted action from the Australian Competition and Consumer Commission which has forced Warrnambool Cheese and Butter (WCB) to write to farmers promising that it will not enforce three contentious clauses in the contracts while the dairy giant has agreed not to include similar terms in future supply agreements.
ACCC deputy chair Mick Keogh said WCB signed the three-year agreements with 21 farmers who had come across from Murray Goulburn in 2016, when the rival processor cut dairy prices to below the cost of productions and retrospectively started clawing back payments already made to suppliers.
“Given the situation these farmers were in, these were fairly onerous contracts and they’re not by any means representative of the broader agreements that applied to most Warrnambool suppliers,” Mr Keogh said.
That included clauses that allowed WCB – one of Australia’s largest milk processors – to unilaterally change the farm-gate milk price and other terms, and hit farmers who terminated the agreement with penalties of between $10,000 and $20,000.
The company could also stop a supplier from selling their farm, and were protected with an indemnity clause that Mr Keogh said effectively meant “if anything goes wrong, anywhere, Warrnambool Cheese and Butter is indemnified and the dairy farmer is responsible”.
“Those three that we identified were what were considered to be pretty imbalanced,” he said.
With the contracts set to expire in six months, the ACCC agreed to let WBC pledge not to action any of the offending clauses, rather than have to re-write the contracts. The company will also change its milk supply handbook for the 2018/19 dairy season.
A spokesman for WCB’s owner, the Canadian group Saputo, said it did not consider that the “operation” of its supply agreement had been unfair, but that it had cooperated fully with the ACCC to “fully address its concerns”.
“No milk suppliers had raised any concerns over the alleged unfair terms,” he said.
“WCB highly values its milk suppliers and considers these relationships as essential to the success of its business.”
Saputo has launched a take-over bid for Murray Goulburn, which has been approved by shareholders and the ACCC, and is waiting on approval from Australia’s Foreign Investment Review Board.
The ACCC’s powers to police unfair contract terms were extended in late 2016 to cover dealings between large businesses and small businesses, as well as between large businesses and consumers.
The watchdog’s inquiry into the dairy industry, completed earlier this year, called for a mandatory code of conduct to protect farmers from unfair contracts with diary processors.
By: Patrick Hatch
Source: The Sydney Morning Herald