Some of Australia’s biggest winemakers have agreed to change their supply agreements with grape growers after the ACCC raised concerns that the contracts contained terms which were likely to be unfair.
The ACCC contacted a number of large winemakers following its 2019 wine grape market study, which had highlighted that a number of winemakers were using standard form grape supply agreements which contained contract terms that appeared to be unfair.
“Our work showed that there was a significant bargaining power imbalance between large wine makers and wine grape growers, reflected in many wine grape supply agreements that forced growers to carry substantial risk,” ACCC Deputy Chair Mick Keogh said.
“At the time, we recommended winemakers review their grape supply agreements and remove any unfair contract terms. We have since been in discussions with several winemakers emphasising that supply agreements need to be fair to both parties, and balance their rights and obligations.”
Following the ACCC’s investigation, several winemakers agreed to change contract terms covering contractual disputes with growers, as well as terms relating to wine grape quality assessments.
Some winemakers will also amend terms that allowed them to make unilateral changes to supply contracts, including one‑sided termination rights.
Several winemakers have agreed to attach conditions to their rights to enter growers’ vineyards for inspections, and to not prevent growers from seeking legal or financial advice through confidentiality clauses in the contracts.
However, the ACCC remains concerned about the lengthy payment periods specified in grape supply agreements, which mean that growers are waiting for long periods before being paid for their grapes. While some winemakers have significantly shortened their payment times following the ACCC’s investigation, the majority of payment periods continue to extend beyond the ACCC’s recommended 30 day standard for large winemakers.
“Winemakers have co-operated during this process, and we acknowledge that several have made significant changes,” Mr Keogh said.
“But many winemakers have not agreed to change their payment periods at all, which means growers do not receive their full payments for up to seven months after supplying the grapes.”
“We understand that the industry is currently reviewing its voluntary code of conduct, including the code’s requirements about payment times,” Mr Keogh said.
“We will be watching this process, and may consider further action if a material improvement in payment terms does not occur.”
Background
The ACCC conducted a market study of the wine grape industry in 2018-19. The study examined competition, contracting practices, transparency and risk allocation in wine grape supply chains.
The final report, released in September 2019, included recommendations that:
- Winemakers review their standard form contracts and remove any unfair contract terms.
- Long payment periods should be phased out of standard form contracts.
- A best practice standard of payment within 30 days of the final grape delivery should be adopted for all winemakers in Australia with a total processing capacity across all wineries, including subsidiaries, of over 10 000 tonnes.