The Australian Competition and Consumer Commission today issued a final decision denying authorisation to arrangements proposed by Dairy Western Australia.
Dairy WA proposed to establish a milk negotiating agency to collectively bargain with processors, retailers and service providers on behalf of Western Australian dairy farmers on a range of terms and conditions, including price.
In October 2005, the ACCC issued a draft determination proposing to deny authorisation to Dairy WA because it considered aspects of the arrangements were likely to be anti-competitive. The ACCC noted at that time that the proposal sat at the extreme end of collective bargaining arrangements and could potentially negate the progress and gains made in the industry since dairy deregulation in July 2000.
Following the release of the draft determination, a conference was requested by Dairy WA and further verbal and written submissions were received by the ACCC, including Dairy WA's withdrawal of its application for authorisation of collective boycott provisions.
"The ACCC is aware of the difficulties of individual Western Australian dairy farmers following the significant changes and substantial restructuring that has occurred in the industry over the past decade", ACCC Chairman, Mr Graeme Samuel, said today.
"In this context, the ACCC has a strong record of supporting collective bargaining arrangements in the rural sector, and in particular in the dairy industry".
In December 2005 the ACCC issued a draft determination proposing to grant authorisation to Australian Dairy Farmers and its member farmers, on similar terms to the authorisation granted in 2002**. Under these arrangements, dairy farmers in Western Australia can continue to, as some currently do, collectively negotiate with processors.
The ADF arrangements are substantially different to those proposed by Dairy WA and in the ACCC's view, the ADF arrangements will provide certainty to dairy farmers and processors and will not result in significant anti-competitive detriment.
Despite the withdrawal of its application for authorisation of collective boycott provisions, Dairy WA's proposed arrangements go beyond the collective bargaining proposals previously authorised by the ACCC.
While further information has been provided by Dairy WA, the difficulties encountered by the ACCC in assessing Dairy WA's application (lack of detail as to the operation and management of the milk negotiating agency), identified at the time of issuing the draft determination, were not fully addressed by Dairy WA in its responses to the draft determination.
On the information available to the ACCC, significant competition concerns remain. The ACCC was particularly concerned over the potential for:
- the proposed milk negotiating agency to introduce industry wide agreements and significantly depress competition between dairy farmers on matters such as price
- the proposed arrangements to unduly restrict the ability of dairy farmers to deal with processors and limit their input into their milk supply contracts with the processors, and
- the proposed milk negotiating agency to have a significant detrimental impact on Western Australian dairy processors and in particular the current milk balancing arrangements in the State.
Western Australian dairy farmers can continue to collectively bargain under the terms of the interim authorisation granted to ADF on 18 May 2005 pending the release of the ACCC's final determination in relation to ADF's application for authorisation of substitute authorisation A90966.