Enforcement of the Dairy Code

The Dairy Code of Conduct 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.

Penalties for non-compliance

Not complying with a penalty provision in the Code may result in:

• for processors that do not meet the definition of a small business entity — 300 penalty units ($63,000 as of 25 February 2020) per breach
• for farmers and processors that do meet the definition of a small business entity — 100 penalty units ($21,000 as of 25 February 2020) per breach.

Farmers and processors have different requirements with respect to complying with penalty provisions.

Penalty provisions - requirements for processors

All processors must deal with farmers in good faith. Failing to act in good faith will breach a pecuniary penalty provision.

Processors that are not small business entities

Processors that do not meet the definition of a small business entity may also breach a number of other penalty provisions.

In relation to the obligation on processors to publish standard form milk supply agreement(s) before 2 pm on 1 June each year, a processor that is not a small business entity may breach the penalty provisions if they:

• intend to purchase milk in the coming financial year and do not before 2 pm on 1 June (in the Australian Capital Territory) each year publish on their website:
  • one or more standard form milk supply agreement(s)
  • for each standard form milk supply agreement, a statement of circumstances in which the processor would enter into a milk supply agreement in that form
  • in each standard form milk supply agreement, a statement of justification for each minimum price specified in the standard form
• refuse to enter into a milk supply agreement in the form published on their website when the specified circumstances related to that milk supply agreement exist and a farmer offers to enter into an milk supply agreement in that form
• within 12 months of 1 June, vary or remove a standard form milk supply agreement from their website that was published to meet their 1 June publication obligation.

In addition, a processor that is not a small business entity may breach the penalty provisions in a number of ways.

Topic	Processors risk breaching penalty provisions if:
Non-compliant agreement or purchase of milk	they publish a standard form milk supply agreement on their website that, if entered into, would not be compliant with the Code they enter into a milk supply agreement that does not comply with the Code they purchase milk from a farmer other than under a milk supply agreement
Plain English, single document and written acknowledgement	a milk supply agreement supply period is 90 days or longer, they fail to make all reasonable efforts to obtain written acknowledgement from a farmer that a written record of an unwritten agreement, variation or termination is a complete and accurate record they do not provide all milk supply agreements or variations or written records in plain English and in a single document they do not retain certain records relating to milk supply agreements they do not provide the farmer with a written record within 30 days of: entering into an unwritten milk supply agreement an unwritten variation to a milk supply agreement, or terminating an unwritten milk supply agreement
Variations and terminations	a milk supply agreement is terminated early, they fail to pay the farmer a portion of any loyalty payment calculated on the basis of the portion of the milk supply agreement completed before the termination they unilaterally vary or terminate the agreement other than as provided for by the agreement they vary a milk supply agreement (unilaterally or by agreement) and as a result of the variation the milk supply agreement does not comply with the Code
Step-downs	they retrospectively step-down a minimum price payable under the agreement
Dispute resolution	they do not publish a report on their website detailing all disputes, mediations and arbitrations.

Penalty provisions - requirements for farmers

Farmers may also be subject to pecuniary penalty provisions in the Code. Farmers may breach the pecuniary penalty provisions if they:

• do not deal with processors in good faith
• unilaterally vary a milk supply agreement and, as a result of the variation the milk supply agreement, it does not comply with the Code
• unilaterally vary or terminate a milk supply agreement other than as specifically provided for by the agreement
• do not retain certain records relating to milk supply agreements
• unilaterally vary a milk supply agreement in writing and the written variation is not a single document and written in plain English.

More information

Dairy code of conduct