What the ACCC does
- We regulate the sugar code although, in practice, we have a limited role.
What the ACCC can't do
- We don't give legal advice or fix individual disputes. You should get legal advice on how the sugar code applies to you.
On this page
About the sugar code
The Sugar Code of Conduct is a prescribed mandatory industry code for the sugar cane industry. About 95% of the sugar produced in Australia is grown in Queensland, with the rest grown in northern New South Wales.
The sugar code was introduced to give the industry more certainty about regulation and the conduct that is expected.
It sets out obligations for:
- supply contracts between a sugar cane grower and a mill owner for the supply of cane by the grower to the mill
- on-supply agreements between a mill owner and a sugar marketer for the supply of a certain portion of sugar manufactured by the mill to the marketer, known as grower economic interest sugar.
Key requirements and obligations under the code
Obligation to act in good faith
Parties who enter, or want to enter, into a supply contract or on-supply agreement must act in good faith towards each other under the sugar code.
The obligation to act in good faith covers all aspects of the relationship, including when:
- negotiating a contract or agreement
- performing under a current contract or agreement
- resolving disputes
- acting under the code, including pre-contract arbitration processes
- ending or terminating a contract or agreement.
Although the code doesn't define what good faith means, it is clear that parties must:
- act reasonably, fairly, honestly, and co-operatively
- not mislead, harass, intimidate, or oppress the other party.
Australian courts have found business dealings to be not in good faith when one party acts for an ulterior motive or in a way that undermines or denies the other party the benefits of the contract.
While good faith calls for parties to have due regard to the rights and interests of the other party, it doesn't expect one party to act in the interests of the other party. It also doesn’t prevent parties from acting in their own lawful commercial interests.
Minimum requirements for supply contracts
The sugar code outlines the minimum requirements for supply contracts between growers and mill owners.
These base requirements don't apply, however, when there's another law in Australia that:
- specifically relates to cane supply contracts
- covers the contract between the grower and the mill owner for the supply of cane.
This means that this part of the code:
- doesn't apply to the supply of cane that is already regulated by state legislation, such as Queensland’s Sugar Industry Act 1999
- applies if those relevant parts of state legislation were repealed and weren't replaced with other legislation.
Growers can choose their marketer
How sugar price is determined
The Australian sugar industry uses a longstanding pricing method to work out the price paid by mill owners to cane growers for their cane.
Using this method, the price paid to a grower is mainly decided from the price that the sugar determined to have been produced from that grower’s cane is on-sold for.
Other factors that can go into working out the price paid to the grower include the:
- sugar content from the grower’s cane
- costs incurred by the mill owner relating to the cane or the on-supply of the manufactured sugar, including payments to marketers to sell the sugar, storage costs, financing costs connected to the timing of payments to the grower, and administration costs.
Benefits of being able to choose a marketer
Given how important the sugar price is to their income, growers have wanted to be able to choose the marketer responsible for marketing a portion of the sugar determined to have been produced from their cane.
In the code, this portion of sugar is known as ‘grower economic interest sugar’, or ‘GEI sugar’ for short.
This choice lets growers determine who will market and price their 'GEI sugar'.
Under the code, unless otherwise agreed by the grower and the mill owner, the cane supply agreement must include a term that allows the grower to choose the marketer that will sell the GEI sugar.
Grower choice in relation to GEI sugar is currently guaranteed for the Queensland sugar industry under the Sugar Industry Act 1999 (Qld). Should the Queensland legislation be repealed, the sugar code forms a backstop to ensure grower choice is still provided in supply contracts.
Pre-contractual arbitration
Where parties can't agree on the terms of a supply contract or on-supply agreement, the sugar code sets out a process for pre-contractual arbitration.
As long as the conditions in the code around arbitration are met, a negotiating party may refer the dispute to an independent arbitrator to make a determination. They notify the other party in writing. The parties appoint the independent arbitrator.
The code outlines:
- the timing of the process
- the appointment, obligations, and powers of the arbitrator
- how the arbitration costs are allocated between parties.
Role of the ACCC in the sugar code
The ACCC is the regulator responsible for enforcing compliance with the sugar code.
In practice, the ACCC has a limited role.
As there are no civil penalty provisions in the sugar code, we are unable to seek civil pecuniary penalties or issue infringement notices if the code is breached.
However, if the obligation to act in good faith is contravened, we may:
- issue a public warning notice, or
- seek a court order for the contravening party to redress the loss or damage that is suffered by third parties as a result of the breaching conduct.