The Dairy Industry Code of Conduct is an industry code regulating the conduct of farmers and milk processors in their dealings with one another. The Code came into effect on 1 January 2020. Since 1 January 2021, all milk supply agreements must comply the Code.
The Dairy Industry Code of Conduct (the Code) aims to improve the clarity and transparency of trading arrangements between dairy farmers and those buying their milk.
The Code applies to dealings between a dairy farmer and any corporation that purchases milk directly from them. The Code refers to these parties as ‘processors’, and they may include supermarkets, milk brokers, cooperatives or corporations created for the purposes of collective bargaining.
Some sections of the Code do not apply when a processor is a small business entity.
The Code provides both processors and farmers with a number of rights and obligations. These include:
- an obligation on both farmers and processors to act in good faith
- a set of minimum disclosure requirements and protections that must be included in every milk supply agreement regulated by the Code
- a right to certain dispute resolution processes, including mediation.
Under the Code, farmers and processors need to keep a written record of a milk supply agreement, and any variations or terminations of the agreement, as well as other specified records, for at least 6 years.
Your rights and obligations under the Code are in addition to those under the Australian Consumer Law and the Competition and Consumer Act 2010.
If you are uncertain about your rights and obligations under the Code, you should consider seeking legal advice.
The Dairy Code requires processors to only purchase milk under a milk supply agreement.
The Code requires all processors (other than those that meet the Code’s definition of a small business entity) that intend to purchase milk during the next financial year to publish standard forms of milk supply agreements on their website before 2 pm on 1 June (Australian Capital Territory time).
Written and unwritten milk supply agreements
The Code allows parties to enter into milk supply agreements using either written or non-written (for example, verbal) means.
If parties enter into a non-written agreement, the Code requires the processor to send a written record of the agreement to the farmer within 30 days of agreement. The processor must also make all reasonable efforts to obtain written acknowledgement that the written record is an accurate record of the agreement.
Both a written milk supply agreement and a written record of a milk supply agreement must:
Price step-downs and step-ups
The Code prohibits retrospective step-downs in all circumstances. There are specific requirements regarding the use of prospective step-downs that can only occur in limited exceptional, temporary circumstances.
The Code does not prohibit terms permitting a processor to pay amounts in excess of the minimum milk price (other than some restrictions on certain types of loyalty payments). However, if a processor wishes to vary the agreement to increase (or ‘step-up’) the minimum milk price, such variations must be done in accordance with the terms of the agreement or with the consent of both parties.
Exclusive milk supply agreements
The Code does not prohibit exclusive milk supply agreements. However, the Code does prohibit exclusive milk supply agreements that also include:
- a tiered pricing arrangement (where the minimum price for milk supplied after a certain volume is lower than the minimum price for milk supplied below that volume), or
- a maximum volume of milk that the farmer may supply under the agreement.
If a processor publishes an exclusive milk supply agreement, the Code requires processors to also publish non-exclusive milk supply agreements as part of their 1 June publication deadline.
Requirement for milk supply agreements to comply with Code
A processor may breach the pecuniary penalty provisions of the Code if they enter into a milk supply agreement that does not comply with the Code.
If farmers and processors have entered into milk supply agreements that are later found to be non-compliant, they may also have private rights and remedies available to them under the Competition and Consumer Act 2010. Parties should seek legal advice on their options.
Both farmers and processors should be aware that they may breach the pecuniary penalty provisions of the Code if they unilaterally vary or terminate a milk supply agreement other than as specifically provided for by the agreement.
Under the Code, a milk supply agreement must provide for both an internal complaints handling procedure and a mediation process. The Code also provides both processors and farmers with a right to seek to resolve a dispute via mediation using the process set out in the Code.
A milk supply agreement may also provide for an arbitration process, including by adopting the arbitration process set out in the Code.
Before resorting to mediation or arbitration, parties must first try to resolve the dispute via the processor’s internal complaints handling process.
The Code requires all processors (other than those that meet the Code’s definition of a small business entity) to publish reports on disputes on their website before 2 pm on 1 June (Australian Capital Territory time).
Contact the ASBFEO for dispute resolution and mediation services
The ACCC cannot provide legal advice on the Code or provide dispute resolution services.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) can provide you with information on options to resolve Dairy Code disputes with access to mediation and/or arbitration services. Visit the ASBFEO website, email email@example.com or call 1300 650 460.
The ACCC is responsible for enforcement of the Code and investigates alleged breaches. Decisions about which matters to pursue are made in line with the ACCC’s Compliance and Enforcement Policy. The Code contains penalty provisions. Not complying with a penalty provision could result in the ACCC taking court action seeking a financial penalty for the breach or issuing an infringement notice.
Persons who have suffered loss or damage as a result of contraventions of the Code may also take court action seeking other remedies, such as damages.
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