Competition watchdog says new rules are needed to ensure fair trading for ‘vulnerable’ farmers

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Australia needs new fair-trading laws, according to a report released today by the Australian Competition and Consumer Commission.

The competition watchdog is also expected to investigate claims of unfair trading in the chicken meat and horticulture sectors.

The found markets for fresh foods including meat, dairy, seafood, horticulture and eggs have “characteristics likely to lead to bargaining power imbalances”.

Releasing the report on the final sitting day of the parliament for 2020, Treasurer Josh Frydenberg said the inquiry had found “examples of one-sided contract practices, commercial retribution, inefficient allocation of risk and a lack of price transparency”.

Mr Frydenberg said the ACCC would conduct further investigations into a range of unfair contract terms in the chicken meat industry and alleged non-compliance by horticulture wholesalers.

The ACCC report has made four recommendations to government and industry including to:

  • Mandate the Food and Grocery Code with significant penalties for contraventions
  • Establish economy-wide unfair trading laws
  • Toughen up unfair contract provisions in business-to-business contracts
  • Increase price transparency reporting across perishable agricultural commodities

Bargaining power imbalances

“Farmers are particularly vulnerable to issues stemming from limited competition at the wholesale or retail level,” ACCC Deputy Commissioner Mick Keogh said following the release of the report.

“The more perishable a product is, the weaker the farmers’ bargaining power often is,” he said.

The ACCC found that bargaining power imbalances were also present at the wholesale level of the market and that wholesalers operate “in a highly contested, tough bargaining environment”.

“The effects of imbalances in bargaining power can weaken confidence in markets, reduce incentives to invest and result in slower productivity growth,” Mr Keogh said.

The Government ordered the three-month review in August

Agriculture Minister David Littleproud has said the inquiry was not an attempt to regulate prices, but would “identify problems and recommend policy options — including a possible all-encompassing Agricultural Code — if appropriate.”

It is not clear when the Government will formally respond to the recommendations.

Releasing the report, Mr Frydenberg said the Government was “committed to a vibrant and sustainable market-based agriculture sector and will consider the ACCC findings and recommendations in detail”.

The inquiry received more than 80 submissions.

by national rural reporter Kath Sullivan (Original ABC Article)