Coles supermarket and Brownes Foods Operations have each paid A$39,600 (about $28,205) in penalties for breaching Australia's mandatory dairy code of conduct, the Australian Competition and Consumer Commission (ACCC) announced on 22 May.
Coles violations
The ACCC alleged Coles breached the code by publishing two milk-supply agreements that required suppliers to provide milk exclusively to the retailer. The regulator also claimed Coles included a cap on the maximum volume of milk farmers could produce.
Coles buys about 490 million litres of fresh milk each year across the southern dairy regions and Western Australia. The exclusive supply terms and volume caps limit farmers' ability to supply other processors and restrict total milk production.
Brownes violations
Brownes Foods Operations, which trades as Brownes Dairy, published two milk-supply agreements that did not clearly set out the minimum prices applying across the full supply period. The ACCC also said the processor "did not justify the reason" for those minimum prices.
Brownes is a medium-sized processor based in Western Australia and purchases around 150 million litres a year from about 50 dairy farmers.
Why this matters
ACCC deputy chair Mick Keogh said dairy farmers need transparent supply terms and pricing when deciding who to supply. Volume caps in exclusive agreements are particularly concerning because they can limit milk production while restricting farmers' ability to work with multiple processors.
The dairy code took effect on 1 January 2020 and is mandatory for supply relationships between dairy farmers and processors with aggregated annual turnover above A$10m. The ACCC is responsible for enforcing it.
The regulator emphasized that payment of a penalty is not an admission of a contravention. The ACCC also said it has engaged with three other unnamed dairy processors regarding minor alleged breaches. Those businesses received warnings and have taken steps to improve compliance.