Lion, Norco and Fonterra agree to amend milk supply agreements

Fonterra Milk BottlesDairy processors Lion Dairy & Drinks, Norco, Parmalat, Brownes Food Operations and Fonterra have all agreed to amend terms in their milk supply agreements to address ACCC concerns that terms were unfair to dairy farmers.

Most processors will now allow dairy farmers the right to terminate their contract if the processor varies supply terms such as price or quality requirements, that negatively impact the farmer.

The ACCC has been working with dairy processors over the past year to ensure  that contracts comply with the business-to-business unfair contract terms law. Following an inquiry into the competitiveness, trading practices, and transparency of the Australian dairy industry the ACCC made a recommendation that dairy processors and farmers implement a mandatory code of conduct.

“Farmers should be getting a fair deal when they contract to supply milk to dairy processors,” ACCC Deputy Chair Mick Keogh said.

“Assessing unfair contract terms in the dairy industry is complex and requires careful consideration. Our work focused on terms in milk supply contracts that have the potential to cause the greatest harm to farmers.”

The ACCC also raised concerns about lengthy notice periods for farmers to terminate their contracts, one-sided termination rights, broad indemnities, and terms that restrict a farmer’s ability to lease a farm or sell their cattle.

“The ACCC worked with each processor individually to ensure amendments did not disadvantage farmers,” Keogh said.

“Where we raised concerns, most processors worked with us to find a solution to better balance farmers’ rights under the contracts.”

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