AUSTRALIA – The largest dairy products group in the world, Lactalis has been found to have breached Australia’s dairy code of conduct, a Federal Court has ruled in a case that dates back to last year.

The Australian Competition and Consumer Commission (ACCC) had initiated court proceedings against the local unit of France-headquartered Lactalis in the summer of 2021, claiming the world’s largest dairy company “breached” certain conditions of the code.

Lactalis was the first to have such legal proceedings brought by the anti-trust body to court since the rules were introduced in 2020 to “address systemic transparency issues and bargaining power imbalances between dairy farmers and processors”.

The Court ruled Lactalis Australia breached the code when it failed to publish milk-supply agreements on its website by a deadline of 2 pm on 1 June 2020, and “instead required dairy farmers to sign-up through a web portal to receive them by email”, according to a statement today (16 September) from the ACCC.

Another breach was identified connected with Lactalis “publishing and entering into agreements that allowed them to unilaterally terminate the agreement in circumstances that did not amount to a material breach”.

The statement also noted: “In particular, Lactalis was permitted to unilaterally terminate the agreement when, in their opinion, the farmer had engaged in ‘public denigration’ of processors, key customers or other stakeholders.”

Other ACCC claims were dismissed by the Court, namely that “Lactalis had failed to publish genuine non-exclusive milk-supply agreements by requiring farmers to supply a minimum of 90% of their monthly milk production, which the ACCC alleged would have the effect of prohibiting most farmers from supplying milk to another processor”.

The Court also concluded that Lactalis did not fail to meet the Code’s ‘single document’ requirement, which is intended to provide a single source of farmers’ obligations, to provide farmers with certainty regarding the content of their agreement”.

The ACCC said a hearing to discuss “penalties” will be held at a later date.

Mick Keogh, the anti-trust body’s deputy chair, said this is an important case for the ACCC as these are the first proceedings it has instituted under the Dairy Code of Conduct.

He added that the decision is a win for dairy farmers who generally have limited bargaining power in their dealings with much larger processors.

Keogh stated: “In breaching the Code’s requirement to publish its milk supply agreements by the deadline, Lactalis made it harder for farmers to compare milk prices and contract terms across different processors.”

Responding to the claims first made last year, Lactalis in France had said: “Lactalis Australia believes that we fully complied with the Dairy Code of Conduct…The issues raised by the ACCC regarding Lactalis Australia are technical, legal issues that did not adversely impact our farmers in any way.”

However, ACCC had claimed in its initial charges that Lactalis purchases milk from more than 400 dairy farmers across all of Australia’s states for brands such as Pauls, Oak, Vaalia, and Ice Break, and those breaches “weakened the bargaining power of farmers who supply milk to them”.

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