ADF warns oversight needed as ACCC clears Lactalis-Fonterra deal
Australia’s peak representative group for dairy farmers has expressed serious concerns following the competition watchdog’s decision not to oppose a potential deal between two of the industry’s biggest dairy businesses.
Australian Dairy Farmers (ADF) President, Ben Bennett, said the Australian Competition and Consumer Commission (ACCC) had left farmers vulnerable in giving the green light to Lactalis’s proposed takeover of Fonterra’s Australian dairy business.
Today’s news means Lactalis can progress discussions with Fonterra, along with any other interested parties.
Mr Bennett said the decision risks further weakening processor competition in Victoria and Tasmania – two of the country’s most critical dairy regions.
“Combining two major buyers reduces choice and bargaining power for farmers,” Mr Bennett said.
“That’s a major threat to farmgate prices, especially in a shrinking milk pool.”
The ACCC concluded that the merger would not substantially lessen competition, citing different product mixes, import competition, and retail buyer power. However ADF maintains:
- Farmer options are already limited, particularly in western Victoria and northern Tasmania. Post-merger, some regions may only have one major buyer;
- Market concentration will grow, reducing pricing tension. Fonterra and Lactalis may target different contract types, but still influence prices across the same regions;
- Past conduct matters: Lactalis has a record of Dairy Code breaches, including a $950,000 fine. Enforceable compliance obligations are essential; and
- Risk of compounding market dominance: A deal between Fonterra and Lactalis increases market concentration of processors. This further reduces competition right along a supply chain that is already dominated at the processor and retail end by supermarket giants Coles and Woolworths. Farmers need strong processor choice.
ADF is calling for court-enforceable undertakings to protect farmers, including:
- Preserving milk supply freedom – no forced exclusivity in contracts with farmers;
- Honouring all current Fonterra milk contracts;
- Guaranteeing continued operation of key processing sites; and
- Committing to regular Dairy Code compliance audits.
“Without enforceable protections, we risk further processor consolidation that hurts farmers and undermines supply security,” Mr Bennett said.
ADF urges the Federal Government and regulators to strengthen the Dairy Code of Conduct and ensure any deal maintains fair competition and protects the interests of local farmers.
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