The Australian Competition and Consumer Commission today issued a draft determination proposing to grant authorisation* for Premium Milk Supply Pty Ltd to collectively bargain farm-gate prices and milk standards with Pauls Limited on behalf of participating South East Queensland dairy farmers.
"The authorisation has been granted as a transitional step to help smooth the path to a more competitive market following deregulation of the dairy industry on 1 July 2000", ACCC Acting Chairman, Mr Rod Shogren, said today.
"The ACCC has also granted interim authorisation in relation to the proposal, which enables the parties involved to engage in the proposed conduct prior to the ACCC's final determination being issued.
"The proposed arrangements are considered likely to deliver some public benefits due to efficiencies from transaction cost savings and by encouraging new investment necessary for farmers to operate in a more competitive market.
"Dairy farmers, particularly in States such as Queensland that traditionally produced large quantities of market milk where the price was administratively fixed, are currently experiencing difficulty in adjusting to the new environment where prices are no longer regulated.
"However, the ACCC did not accept all the claimed public benefits associated with the proposed arrangements. The ACCC does not consider countervailing power that would lead to increased prices paid by consumers to be a public benefit.
"In this instance, the ACCC concluded that there are competitive forces that would negate the likelihood that any higher prices negotiated by Premium would be passed on to consumers. In particular:
- the ability for Pauls to purchase milk outside the collective arrangements from any member of Premium or any other producer in Queensland or interstate
- the ability for producer members of Premium to opt out of the collective arrangements and negotiate individually with Pauls or another processor
- the presence of other major processors in direct competition with Pauls
- the buying power of retailers".
As part of the ACCC's consideration of the proposed arrangements a wide range of industry participants, government and consumer bodies was consulted. The ACCC did not receive any submissions opposing the proposed arrangements.
The authorisation the ACCC proposes to grant is for four years, and covers farmers who may participate in the arrangements in the future.
Before the release of the ACCC's final determination, Premium and interested parties have the opportunity to request a conference to discuss the operation and effect of the draft determination.
*The ACCC has the function, through the authorisation process, of adjudicating on certain anti-competitive practices that would otherwise breach the Trade Practices Act. Authorisation provides immunity from court action, and is granted where the ACCC is satisfied that the practice delivers offsetting public benefits. Applications for authorisation are considered on a case by case basis. The onus is on the applicant to demonstrate that there is public benefit arising from the conduct and that the public benefit outweighs any public detriment. Authorisation, once granted, does not compel parties to participate in the proposed arrangements.