THE competition watch-dog has announced it is taking legal action against Murray Goulburn following an investigation into last year’s dairy industry crisis but won’t be pursuing claims against another milk processor Fonterra Australia.
The farm gate claw-back pricing scandal sparked a multi-million dollar industry support package from the Coalition government during the midst of last year’s federal election.
A statement just released from the Australian Competition and Consumer Commission (ACCC) said it had now instituted proceedings in the Federal Court against Australia's largest milk processor, alleging Murray Goulburn engaged in unconscionable conduct and made false or misleading representations in contravention of the Australian Consumer Law.
It said the ACCC also alleges that former managing director Gary Helou and former chief financial officer Bradley Hingle were knowingly concerned in Murray Goulburn’s conduct.
“The allegations relate to representations made by Murray Goulburn to its Southern Milk Region dairy farmers between June 2015 and April 2016 about the average farmgate milk price (FMP) it expected to pay them during financial year 2015/16 (FY16),” ACCC Chairman Rod Sims said.
“The ACCC alleges that Murray Goulburn’s conduct had an adverse impact on many farmers who, as a result of Murray Goulburn’s representations regarding the farmgate milk price, had made business decisions.
“The farmers relied on Murray Goulburn’s representations and were not expecting a substantial reduction in the farmgate milk price, particularly so close to the end of the season when it was not possible for them to practically readjust their expenditure.”
The ACCC alleges that from June 2015 until February 2016, Murray Goulburn misled farmers by representing that it had a reasonable basis for setting and maintaining an opening FMP of $5.60 per kilogram of milk solids (kgms) and a forecast final FMP of $6.05/kgms, and that it considered the forecast final FMP of $6.05/kgms was the most likely outcome for FY16, when that was not in fact the case.
Further, the statement said the ACCC alleges that from February 2016 until April 2016, Murray Goulburn misled farmers by representing it had a reasonable basis for expecting to be able to maintain its opening FMP of $5.60/kgms for the remainder of the season, and that it considered a Final FMP of $5.60/kgms was the most likely outcome for FY16, when that was not in fact the case.
The ACCC alleges that, in all the circumstances, Murray Goulburn’s conduct towards farmers was unconscionable.
These circumstances include that Murray Goulburn:
knew that farmers relied on information about the opening FMP and forecast Final FMP to make significant business decisions during the financial year;
was aware that many farmers were unable to easily switch milk processors, particularly those contracted to Murray Goulburn;
created an expectation that the opening FMP would be set conservatively and would be a minimum price, and that the final FMP would be higher than the opening price;
knew that farmers expected that it would update the forecast Final FMP regularly to reflect material changes; and
provided and maintained FMP forecasts despite knowing that these forecasts were overstated and unachievable in FY16 and that farmers were making decisions in reliance on these forecasts.
Mr Sims said many farmers are in a relatively vulnerable trading position and rely on transparent pricing information in order to budget effectively and make informed business decisions.
He said in these circumstances, farmers were entitled to expect Murray Goulburn to have a reasonable basis for determining its pricing, and to regularly update farmers if there was any change in forecast prices.
The ACCC said it was seeking orders against Murray Goulburn that included declarations, compliance program orders, corrective notices and costs.
The ACCC said it had also decided not to seek a pecuniary penalty against Murray Goulburn because, as a co-operative, any penalty imposed could directly impact on the affected farmers.
But the competition watch-dog is seeking declarations, pecuniary penalties, disqualification orders and costs against Mr Helou and Mr Hingle.
Separately, after careful consideration, the ACCC said it had decided not to take any further action against Fonterra Australia in relation to the step-down of its FMP, announced one week after Murray Goulburn’s revised Final FMP in April 2016.
“A major consideration for the ACCC in deciding not to take action was that Fonterra was more transparent about the risks and potential for a reduction in the farmgate milk price from quite early in the season,” Mr Sims said.
The ACCC is continuing to conduct a broader inquiry into the competitiveness, trading practices, and transparency of the Australian dairy industry, with pricing transparency a key focus.
The ACCC will submit its report following the inquiry to the Treasurer before November 1, 2017.
In February, Mr Sims revealed several farm related businesses were set to face upcoming legal action for alleged breaches the Competition and Consumer Act, following investigations, including into the dairy crisis, spearheaded by the ACCC’s dedicated farm unit.
In a statement, Murray Goulburn acknowledged proceedings had been filed in the Federal Court of Australia relating to the dairy pricing issue and the cooperative was now considering the proceedings and noted the ACCC decided not to seek a pecuniary penalty against them.
Shadow Agriculture Minister Joel Fitzgibbon said dairy farming families still reeling from Murray Goulburn’s “outrageous behaviour” would take little comfort from the ACCC’s decision to prosecute.
“The chance to help farmers was missed last year when Barnaby Joyce and Malcolm Turnbull refused to join me in calling upon the Board of Murray Goulburn to deviate from their profit sharing mechanism to return more money to farmers by way of a higher farm-gate price - the deviation was absolutely within the Board’s discretion,” he said.
“The belated prosecution of Murray Goulburn will not help farming families one bit.
“That horse bolted 12 months ago.
“Indeed, the farmers own Murray Goulburn so any prosecution of Murray Goulburn is an action against them.”
The Coalition’s dairy support package announced by Agriculture and Water Resources Minister Barnaby Joyce in late May last year included $555 million in Dairy Recovery Concessional Loans, funding for a new milk pricing transparency index and other measures like boosting financial counselling services.
Mr Joyce has also declined to respond to comments on his role in the dairy crisis one year on from it starting, made by Labor leader Bill Shorten yesterday.
“Barnaby Joyce has never seen a microphone or camera that he won't stop in front of, but the problem is when it actually comes to following up, he hasn't done the work,” Mr Joyce said.
“Let's be really clear here, our dairy farmers are seeing the prices that they are paid for their work going down, it was meant to go up.
“There is no doubt in my mind that despite what the government said, when it comes to action, they will always back the big business against the little guy, the farmers every time.
“They have been selling out the farmers and a year later, I think this is just a debacle and Joyce should hang his head in shame.”