Cooperatives & collective bargaining under the Dairy Code

The Dairy Code of Conduct applies to cooperatives if they purchase milk from farmers. Cooperatives have a limited exemption in relation to open-ended agreements. The Code may apply to collective bargaining arrangements in some circumstances.

Application of the Code to cooperatives

Although the Dairy Code of Conduct does not define a cooperative, the ACCC considers that this includes entities registered, or taken to be registered, as cooperatives under the Co-operatives National Law, corresponding cooperatives laws or other State or Territory laws relating to the formation, registration and management of cooperatives.

Relevantly, the Code defines 'processor' to mean corporations (or certain other persons) that purchase, or that may purchase, milk from farmers 'whether or not the corporation processes the milk'. The Code gives as an example, 'Some cooperatives and milk brokers [that] purchase milk from farmers but don’t process milk'.

Cooperatives and supply periods

The Code usually requires all milk supply agreements to specify the supply period, including a definite end date. However, if the processor is a cooperative and the farmer is a member of that cooperative, the parties may enter into an agreement that continues until it is terminated or the farmer ceases to be a member of the cooperative.

The milk supply agreement still has to comply with all other requirements in the Code, including the requirement to provide a minimum price for the entire supply period.

For the purposes of some obligations, the supply period is treated as if it is 90 days or longer. A processor who wishes to enter into milk supply agreements without a specified end date should seek legal advice on whether they are likely to be a cooperative for the purposes of the Code.

Collective bargaining

Collective bargaining is an arrangement where two or more businesses (including farmers) come together to negotiate with another party, such as a processor, over terms, conditions and prices. A group of farmers may sometimes appoint a representative, such as an industry association, to act on its behalf in the negotiations.

Farmers who are considering entering into a collective bargaining arrangement should consider the ACCC’s Small business collective bargaining guidelines.

Potential breaches and penalties

Farmers should be conscious that without ACCC approval prior to commencing negotiations, collective bargaining risks breaching the Competition and Consumer Act 2010.

The potential penalties for breaching these provisions are significant. Maximum penalties for each contravention by a corporation are the greater of $10 million, three times the value of any benefit obtained by the corporation or (if the value of the benefit cannot be determined) 10 per cent of annual turnover.

Collective bargaining and compliance with the Code

In some circumstances a collective bargaining arrangement may be required to comply with the Code. For example, if a collective bargaining agreement involves the collective bargaining entity purchasing milk from farmers in the first instance to then pool and sell to a processor.

Accordingly, parties should seek legal advice about the application of the Code and the Competition and Consumer Act 2010 to their collective bargaining arrangements.

More information

Dairy code of conduct