October 28, 2019

SADA Welcomes Draft of Mandatory Code


The South Australian Dairyfarmers’ Association (SADA) welcomes the release of the Exposure Draft of the Dairy Industry (Mandatory) Code circulated by the Commonwealth Government.

In a 2018 report the ACCC was highly critical of the imbalance in market power between dairy farmers and the processors who purchased their milk. The outcome of that report was a determination by the Commonwealth to introduce a Mandatory Code of Conduct in Australia. A draft of that code has now been circulated.

SADA applauds the proposed mandatory code as drafted. The government has listened to the concerns of dairy farmers and reflected those concerns in this draft. It has one critical comment regarding penalties.

Under the proposed code all penalties are 300 penalty units – equivalent to $63,000 today. Bearing in mind that the code does not apply to small business entities, (businesses with a turnover of less than $10 million annually), then the fine imposable on a larger business such as a multi-national corporation would represent a mere inconvenience. However, a similar fine imposed on a farmer could be terminal to the farmer’s business.

As the proposed Mandatory Code of Conduct was born from the disparity between parties, to place the parties on a parity when it comes to penalties is inconsistent with the findings of the ACCC report.

However, were fines to be imposed, SADA would expect that the tribunal considering the penalty would take such a disparity into consideration.

Quotes attributable to John Hunt, President of SADA

“This exposure draft is very welcome and reflects the findings of the ACCC when it comes to the dairy industry.”

“This code will see some processors of milk change their modus operandi when it comes to their contractual relationships with farmers and the provisions demanding good faith will be relied upon by farmers.”

“This code will demand that the contractual relationship will be one of mutual respect and will reflect a deference to civilized conduct between processors and farmers. Consequently, the contract will become a reliable document rather than a bludgeon.”