Competition watchdog takes dairy war past the farm gates

2nd May 2017 10:11 AM
Murray Goulburn is facing a battle against the ACCC in the Federal Court. Murray Goulburn is facing a battle against the ACCC in the Federal Court. Bev Lacey

IT IS a war that has been waging for quite some time, but the fight for fair trading practices in the dairy industry has finally come to a head.

The competition watchdog is taking Australia's largest milk processor, Murray Goulburn, to the Federal Court to battle it out, alleging it engaged in unconscionable conduct by way of misleading farmers on what milk prices they could expect to receive.

Trouble has been brewing in the dairy sector since June 2015 but it was when Murray Goulburn clawed back farm gate milk prices in April 2016 that things went downhill, affecting the profitability of dairy farmers around Queensland.

Many farmers rely on Murray Goulburn's representations regarding farm gate milk prices and make business decisions based on the information.

They were not expecting a substantial reduction in the farm gate milk price, particularly so close to the end of the season, when it was not possible for them to practically re-adjust their expenditure.

As a result, the ACCC is alleging the processor misled farmers on Farmgate Milk Prices (FMP), with the information proving to be misleading in the lead-up to the FMP clawback.

ACCC chairman Rod Sims said in all the circumstances, the ACCC found Murray Goulburn's conduct towards farmers was unconscionable.

"Many farmers are in a relatively vulnerable trading position, and rely on transparent pricing information in order to budget effectively and make informed business decisions,” Mr Simms said.

"In these circumstances, farmers were entitled to expect Murray Goulburn to have a reasonable basis for determining its pricing, and to regularly update farmers if there was any change in forecast prices.”

The ACCC also alleges that former managing director Gary Helou and former chief financial officer Bradley Hingle were knowingly concerned in Murray Goulburn's conduct.

Despite the money lost throughout the FMP clawbacks, the ACCC is not seeking pecuniary penalties against Murray Goulburn because, as a co-operative, any penalty imposed could directly impact on the affected farmers.

However the ACCC is seeking declarations, pecuniary penalties, disqualification orders and costs against Mr Helou and Mr Hingle.

LEGAL MEANINGS

  • Pecuniary penalties are monetary fines imposed and collected by civil courts.
  • When a business is declared bankrupt by a court, its current and past directors (those associated with the firm for a certain number of years usually three prior to bankruptcy) may be so disqualified if they are indicted for failure to discharge directors' duties, or for fraud or misfeasance.