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

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