Wednesday 18th Jul, 2018

Warrnambool Cheese agrees to change ‘unfair’ contracts

Photo: Dairy Australia
Photo: Dairy Australia

Warrnambool Cheese and Butter has agreed to alter its contract terms, after the market watchdog found deals between farmers and the Canadian-owned dairy firm often contained potentially unfair contract terms.

WCB, which is owned by Montreal-based dairy giant Saputo, responded quickly to address concerns raised by the Australian Competition & Consumer Commission, the watchdog said on July 2.

According to the ACCC, WCB’s contracts with farmers often contain terms that allow it to unilaterally vary the milk price and other milk supply terms, while also preventing the farmer from terminating the supply agreement early without paying a fee.

Contracts also placed restrictions on farmers selling their farm and required farmers to indemnify WCB for loss which could be avoided or mitigated by WCB, the watchdog said.

“Unfair contract terms in milk supply agreements have the potential to harm dairy farmers and their businesses,” ACCC deputy chair Mick Keogh said.

“WCB has worked with the ACCC to find a solution that balances the farmers’ rights under the milk supply agreements and addresses the ACCC’s concerns about potentially unfair contract terms.”

The ACCC credited WCB for acting “promptly,” and agreeing to a number of steps to address the concerns.

“WCB agreed it would not impose a penalty on any farmer who terminates their milk supply agreement before the expiration date, it would not unreasonably withhold consent from a farmer wishing to sell their farm, and it would narrow the scope of the indemnity required from farmers,” the ACCC said in a statement.

“WCB has written to farmers who operate under these milk supply agreements to advise them of the changes to their agreement. WCB will also make the relevant changes to its milk supply handbook for the 2018/2019 season.”

The news follows an inquiry by the ACCC into the competitiveness, trading practices, and transparency of the Australian dairy industry. The inquiry led to a final report submitted to Treasury on April 30, 2018.

The report included a key recommendation that a mandatory code of conduct be implemented to improve contracting practices between dairy processors and farmers.