The Dairy Code of Conduct does not prohibit exclusive agreements. However, it does prohibit combining exclusivity with some obligations, and also requires processors to publish a non-exclusive version of any standard form milk supply agreements.
The Dairy Code of Conduct prohibits milk supply agreements from including both an obligation to exclusively supply to the processor and either:
- tier pricing (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.
The Code does not prohibit exclusive supply agreements, only the combination of exclusive supply with either of the above two terms.
The Code requires processors to publish milk supply agreements on their websites by 1 June of each calendar year.
Where a processor offers to enter into an exclusive supply agreement in particular circumstances, the Code requires a processor to also publish a non-exclusive version of that agreement, which is available to farmers in the same circumstances.
For guidance on processors’ obligations during the publication period, see Publishing obligations under the Dairy Code.
The Code defines an ‘exclusive supply agreement’ as a milk supply agreement that ‘prohibits the farmer supplying milk to another processor’.
The Code does not prohibit processors from requiring farmers to provide a minimum volume of milk. Therefore, the ACCC is unlikely to consider a milk supply agreement to be an ‘exclusive agreement’ solely because it requires a farmer to supply a specified minimum volume.
However, the ACCC considers that an agreement with a minimum volume obligation may meet the definition of an exclusive agreement if the consequence of the minimum volume obligations is such that an ordinary farmer could not be expected to ever have the capacity to supply any other party.