Australia’s competition authority has launched legal proceedings against the local unit of France-headquartered dairy major Lactalis for “alleged breaches” of the dairy code of conduct.

The Australian Competition and Consumer Commission said it has “instituted Federal Court proceedings against Lactalis Australia, adding it is the “first time the ACCC has commenced proceedings for alleged breaches of the code”.

It continued: “The ACCC is seeking orders including penalties, declarations, injunctions, a corrective advertising order and costs.”

Lactalis purchases milk from more than 400 dairy farmers located in all states in Australia and incorporated into brands such as Pauls, Oak, Vaalia and Ice Break, according to the ACCC, which said the claimed breaches “weakened the bargaining power of farmers who supply milk to them”.

ACCC said the allegations only relate to milk supply agreements offered to Australian dairy farmers in 2020 and do not relate to any subsequent agreements.

The competition authority explained: “The allegations made by the ACCC include that Lactalis failed to make its milk supply agreements publicly available on its website by the deadline of 2pm on 1 June 2020, as required by the Code, and instead required farmers to sign up to a mailing list to receive a copy of the agreements.

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“This had the effect of reducing the transparency of the terms and conditions in Lactalis’ milk supply agreements during a critical and limited timeframe in which farmers had to weigh their supply options.”

And further: “The ACCC also alleges Lactalis failed to publish genuine non-exclusive milk supply agreements, which is a key requirement under the code as it gives farmers more flexibility in choosing who to supply to. Instead, Lactalis required farmers to supply a minimum of 90% of their monthly production volume, which the ACCC alleges would prohibit most farmers from supplying milk to another processor.

“It is also alleged that Lactalis failed to comply with the code’s ‘single document’ requirement by failing to provide farmers with all three documents that made up Lactalis’ milk supply agreement. In a majority of cases, only one of the three documents was provided to farmers at the time the agreement was executed.”

The French dairy company offered a response via a statement provided to Just Food: “Lactalis Australia believes that we fully complied with the Dairy Code of Conduct, which is currently subject to its own review by the ACCC and industry to address widespread implementation concerns.

“The issues raised by the ACCC regarding Lactalis Australia are technical, legal issues that did not adversely impact our farmers in any way. In any event, we have made all required changes to address those technicalities.

“This matter is before the Court now and our main focus in these difficult times continues to be the wellbeing of our employees, customers, farmers and local communities.”

Mick Keogh, the deputy chairman of the ACCC, said in the competition body’s statement: “It is very important that farmers have access to a complete record of the milk supply agreement they have signed up to. This safeguards against any subsequent changes to the agreement and allows both parties to understand their rights and obligations.”

ACCC went on to claim that “Lactalis published and entered into milk supply agreements with farmers that permitted it to terminate the agreement when, in the opinion of Lactalis, the farmer had engaged in ‘public denigration’ of processors, key customers or other stakeholders.

“The ACCC alleges this clause would allow Lactalis to terminate agreements in circumstances where there was not a material breach, when the Code requires that for processors to unilaterally terminate agreements, the circumstances must involve a material breach by the farmer.”

Keogh added: “We are continuing to assess agreements published on 1 June this year for compliance with the code. The ACCC reminds dairy processors that failure to comply with the dairy code may result in enforcement action by the ACCC and attract penalties.”