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Coles held to account

COLES will pay Norco Co-operative Limited (Norco) around $5.25 million for distribution to its dairy farmer members.

The payments follow an Australian Competition and Consumer Commission (ACCC) investigation into whether Coles fully passed on to Norco a 10 cents per litre (cpl) price rise charged to consumers for Coles branded fresh milk, as it claimed it would do in its marketing materials.

Coles has committed in writing to the ACCC that it will pay an additional seven cpl for two-litre and three-litre Coles branded fresh milk, which amounts to around $5.25 million to Norco for milk supplied between April 1, 2019 and June 30, 2020, resolving the ACCC’s investigation.

The ACCC had been investigating allegations that, in a media release, social media posts and in-store signage, Coles represented that the full benefit of the 10cpl retail price increase of its Coles branded two-litre and three-litre milk announced on March 19, 2019, would be passed on to farmers.

The ACCC’s investigation focused on claims that when an unrelated 6.5cpl increase commenced on April 1, 2019, Coles reduced its payments to Norco under the 10cpl retail price increase from 10cpl to 3.5cpl.

“We were fully prepared to take Coles to court over what we believe was an egregious breach of the Australian Consumer Law,” ACCC chairman, Rod Sims said.

“We believe we had a strong case to allege misleading conduct by Coles.

“Accepting this commitment means that farmers will receive additional payments from Coles, with the majority of the money to be paid to Norco within seven days.

“Court action would also have taken many months if not years, with no guarantee that any money would have been paid to farmers as a result,” Mr Sims said.

Coles’ statements included, ‘An extra 10 cents per litre to Australian Dairy Farmers’, and, ‘Coles will pass the extra 10c per litre to processors who will distribute all of the money to the farmers who supply them with milk for Coles Brand’.

“Coles allowed farmers, consumers and the Australian public to believe that its 10cpl price rise would go straight into the pockets of dairy farmers, when the ACCC alleges this was not the case for Norco farmers,” Mr Sims said.

“We are pleased that Norco farmers will now receive additional money, commencing within seven days.

“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.”

Coles has committed to pay a lump sum to Norco for distribution to farmers within seven days, which represents an additional 7cpl base milk price increase for the period between April 1, 2019 and December 1, 2019.

Coles will then also pass on the additional 7cpl to Norco farmers for the period between December 1, 2019 and at least June 30, 2020, by increasing the base milk price paid to Norco for two-litre and three-litre Coles branded fresh milk by 7cpl.

The additional 7cpl is more than the 6.5cpl amount which the ACCC alleges was not passed through to Norco farmers.

ACCC interest in agriculture

THE ACCC was never a household name in regional Victoria.

The ACCC has long been responsible for monitoring and enforcing compliance with Australia’s market competition and consumer laws, including the Trade Practices Act. 

However, in 2015 the consumer watchdog established an agricultural division, and over the last three years, this division has investigated several aspects of agricultural industries. 

According to the ACCC website, the Agriculture Unit was established to examine competition and unfair trading issues in agricultural supply chains, with a view to improving enforcement and compliance with the Competition and Consumer Act 2010 (the Act) across the agriculture sector.

The ACCC highlights three main objectives regarding agriculture including; identifying key agricultural supply chain issues across the agricultural sector for enforcement focus, investigation and prosecution, increasing awareness about codes of conduct, collective bargaining and the ACCC’s consultation processes and conducting specific market studies to enhance our understanding of the competitiveness of agricultural supply chains and how this impacts on farm gate outcomes in general.

Since its inception, the ACCC agricultural department has investigated several industries and made many recommendations.

Perhaps the ACCC recommendation with the most publicity of late has been the recommendation that a mandatory code be introduced for the dairy industry.

As a result of this recommendation, several forums have been held across the country, seeking input into what such a code should contain.

Aside from conducting reviews of industry and supply chains, the ACCC also investigate particular alleged breaches of competition and consumer laws, usually in response to complaints made by consumers to the ACCC.

One particular breach of unfair contract terms legislation included the finding that many milk supply contracts were in breach of the unfair contract legislation introduced in November 2016.

As a result, a milk processing company was informed around 80 contracts were void, and farmers were notified they were not enforceable.

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