Australian Competition and Consumer Commission (ACCC) now has the power to demand information as part of its investigation into the dairy industry.
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Agriculture Minister Barnaby Joyce on Thursday announced that he and Treasurer Scott Morrison had decided the ACCC would undertake an inquiry into the dairy industry under part 7a of the Competition and Consumer Act.
“This will give the power to request information, this takes our level of investigation into the current situation into a more forensic form, some of the questions you’ve been asking will be fleshed out,” Mr Joyce said.
This announcement came at the end of a dairy symposium in Melbourne today, in which farmer representatives and key supply chain stakeholders discussed the challenges facing the industry including low milk prices and supply contract uncertainty.
“I’ve had discussions with the ACCC with what further actions are required and the ACCC has said to be of assistance they have suggested this is what is needed,” Mr Joyce said.
“When you asked me the question how can we ever stop this from happening again, we do it by making sure we have all the information about how this happened in the first instance, this is precisely what we’ve done and that is now announced.
“The ACCC will now go to work to be able to order and request information as to exactly what happened with this fiasco.”
In late April, 10 months into a dairy farmer’s year-long season, Murray Goulburn Co-operative Co., Australia’s biggest dairy processor, announced it could cut the price it paid to farmers for their milk from $5.60 per kilogram milk solids (kg MS) to between $4.75-$5.00.
The country’s second-largest processor, Fonterra Co-operative Group Ltd, followed suit and slashed the price it pays its farmer suppliers from $5.60 to $5, which took the price below the cost of production for many farmers.
In May it was announced the ACCC was investigating the companies over cuts to the farmgate milk price.
Mr Joyce said granting the ACCC these stronger powers to investigate would “...ensure we’ll get to the bottom of how this happened and I’ll do my very best that this form of situation doesn’t happen again”.
Mr Joyce foreshadowed that Murray Goulburn would be under close scrutiny in the inquiry, as the price setter in the Australian dairy industry.
He said granting increased investigative powers to the ACCC would work with other measures the government has taken including supporting an "effects test" – that would make it easier for farmers and other small businesses to prove when bigger players use their position to squeeze them out of the market.
He said this measure would give greater fairness and transparency through the supply chain.
$1/litre milk was also a hot topic at the symposium, Mr Joyce said.
“The days of dollar a litre milk have gone because it sends all the wrong messages, and even consumers now are turning off it because they just say: ‘All I’m doing when I’m buying that is buying a form of exploitation, I don’t want to be part of it. I’m happy to pay an extra 50, 60 cents, whatever it is, I don’t need some farmer working for $4 or $5’.”
Although Mr Joyce said at the symposium industry expressed a wariness for government intervention for price setting.
Australian Dairy Farmers (ADF) acting president David Basham said strengthening the ACCC powers was the “next logical step” and he was pleased by the announcement.
The South Australian dairy farmer said the peak body wanted fairness in contracts between farmers and processors; the end of $1/L milk, and for the discussions with government to continue.
He said the concessional loans needed to be tweaked to better support struggling dairy farmers.
United Dairyfarmers of Victoria president Adam Jenkins said Mr Joyce’s announcement around the ACCC and further investigations was great.
“We’ll be pushing pretty hard to make sure we get our industry back on track, we have a trust and confidence issue and we need to actually rebuild the industry and move forward,” Mr Jenkins said.
“I think this warrants a serious investigation – you’ve got a supply chain of farmers bearing the risk for decisions that are made up the chain and I think that’s what we need to put the emphasis on.”
The ACCC agriculture commissioner Mick Keogh said until they saw the terms of reference, they would not know the scope of the investigation.
He said with issues around value and pricing, the ability to demand information could help clarify investigations; particularly when a small number of big players had ability to affect pricing.