Cotton Seed Distributors Ltd

The Australian Competition and Consumer Commission (ACCC) has accepted a court enforceable undertaking from Cotton Seed Distributors Ltd (CSD) in relation to potentially anti-competitive provisions in its agreements with agents.

CSD is the sole supplier of cotton planting seed in Australia. CSD supplies cotton seed with a mandatory fungicide treatment and optional insecticide treatment from CSD-approved suppliers. CSD supplies cotton seed to growers via a network of agents.

CSD’s agency agreements prohibited agents from engaging in or facilitating ‘overtreatment’ of cotton seed for growers. Overtreatment involves the application of a seed treatment, typically insecticide, after seed has been purchased from CSD.

As a result of the prohibition on overtreatment, growers who wished to use seed that had been treated with insecticide, had little choice but to use a CSD-approved cotton seed insecticide applied by CSD.

The ACCC was concerned that this prohibition had the capacity to harm competition between CSD-approved suppliers and other suppliers of cotton seed insecticide.

CSD has acknowledged that its conduct may raise concerns as to its compliance with the prohibition on anti-competitive agreements in the Competition and Consumer Act.

To address the ACCC’s concerns, CSD provided the ACCC with a section 87B undertaking that it will:

• not enforce the prohibition on overtreatment or any other clauses in its agency agreements which may hinder or prevent agents engaging in or facilitating overtreatment in the current growing season;
• formally amend its agency agreements in the next cotton growing season and not include the prohibition on overtreatment or any other clause which hinders or prevents agents engaging in or facilitating overtreatment in future agreements; 
• continue to assess, in good faith, warranty claims by growers concerning overtreated seed to establish whether the seed complied with CSD’s description of the seed and/or was of acceptable quality at the time it was supplied by CSD;
• implement a competition law compliance program; and 
• notify CSD’s agents and members of its commitments under the undertaking.