Coles and Brownes Dairy Penalized for Breaching Australian Dairy Code

The Australian Competition and Consumer Commission (ACCC) has imposed penalties of A$39,600 each on retailer Coles Group and processor Brownes Dairy. These penalties relate to alleged breaches of the mandatory dairy code of conduct in Australia.

The ACCC found that Coles had published two agreements that required exclusive milk supply from dairy farmers and imposed limits on production volumes. Such conditions could restrict the commercial flexibility of farmers and their ability to increase production capacities.

Brownes Dairy, on the other hand, was found to have published milk supply agreements that did not clearly state the minimum prices for the entire contract period. Additionally, the ACCC alleged that Brownes did not adequately explain the basis of these prices in their contracts.

Despite the penalties, the payment of infringement notices does not equate to an admission of liability or wrongdoing by the companies. ACCC deputy chair Mick Keogh emphasized the importance of transparency in pricing and supply terms under the dairy code, which is crucial for farmers considering long-term supply commitments.

Keogh also raised concerns about production caps in exclusive supply agreements, warning that such provisions could limit farmers' output and prevent them from engaging with multiple processors.

The dairy code of conduct, which came into effect in January 2020, applies to processors with an annual turnover above A$10 million that purchase milk directly from farmers. The ACCC is responsible for enforcing this framework.

Coles sources approximately 490 million litres of fresh milk annually from dairy regions in southern Australia and Western Australia. Brownes Dairy purchases about 150 million litres each year from around 50 farmers in Western Australia. The ACCC has also engaged with three other dairy processors over minor alleged breaches, issuing warnings, and those businesses have since taken steps to enhance compliance.