Australia’s winemakers should review their contracts with grape growers and immediately remove potentially unfair contract terms, including those imposing lengthy payment periods on grape growers, the ACCC says in a new report released today.
The final report of the ACCC’s Wine Grape market study makes ten recommendations to improve the efficiency and fairness of wine grape markets in Australia’s warm climate grape growing regions, where most of Australia’s wine is produced.
“We remain concerned about harmful market practices we have uncovered during the past 12 months, which stem from the bargaining power imbalance that exists between winemakers and growers,” ACCC Deputy Chair Mick Keogh said.
“Our final recommendations include measures to address this imbalance between grape growers and large winemakers, as well as ways of boosting price transparency in the market and improving grape quality assessment.”
The ACCC has recommended all winemakers phase out long-term payment periods in their contracts with growers, and that large winemakers make payment within 30 days of grape delivery.
In addition, all winemakers should review their standard form contracts with growers to ensure they do not include other terms likely to be unfair, according to the legal standard.
“Some contract clauses we have seen, such as lengthy payment terms and unilateral rights for winemakers to vary agreements, clearly put growers at a significant disadvantage,” Mr Keogh said.
“The ACCC will shortly initiate investigations into potential unfair contract terms in wine grape supply agreements. We may take enforcement action against traders whose contracts we consider contain unfair terms.”
To address the lack of pricing transparency, the ACCC has also recommended a significant change to the way grape prices are reported in the industry.
Instead of the current ‘indicative pricing’ system which involves winemakers announcing their indicative prices in December, well after most grape growers have already signed contracts, the ACCC has recommended mandatory post-season price reporting by all major winemakers, with the prices paid to be publicly reported at the completion of each season.
“Under this proposal, grape growers will have detailed information available of actual prices paid by winemakers over the previous season, to inform their decision about which winemaker to supply in the coming season,” Mr Keogh said.
The ACCC’s other recommendations include that:
- All winemakers sign the voluntary Australian Wine Industry Code of Conduct, and parts of this code be strengthened, including its process for dispute resolution.
- National uniform standards for testing and measuring grape sugar levels and colour be developed, to address concerns that current quality assessments lack transparency and can be manipulated.
- Warm climate grower representative organisations should publicly report market trends analysis, with support from Wine Australia.
“While our study focused on warm grape growing regions, several of our recommendations would benefit the entire Australian wine industry, and should be adopted more broadly,” Mr Keogh said.
The ACCC will review the industry’s progress in adopting its recommendations in 12-18 months, and will consider recommending a mandatory code for the sector if little progress is made.
“If the industry does not take this opportunity to act, we are likely to recommend introducing a mandatory code. This action must include, at a minimum, all large winemakers signing and complying with the strengthened voluntary industry code,” Mr Keogh said.
The full report and list of recommendations can be found at Wine grape market study.
The ACCC’s market study of the wine grape industry was launched in September 2018, after feedback from participants during previous ACCC engagements with the industry. The ACCC held two public forums and other meetings in warm climate grape production regions. It also sought feedback and conducted extensive engagement with market participants following its June 2019 wine grape market study interim report.
This market study focuses on what are referred to in the industry as warm climate grape growing regions. The three warm climate regions are the Riverland, Murray Valley (which includes the Murray Darling and Swan Hill regions) and Riverina.
About 1500 growers operate in these regions, which produce approximately two thirds of Australia’s wine grapes.