Murray Goulburn faces accusations it misled dairy farmers about the milk price and engaged in “unconscionable conduct”, in a federal court case launched by the competition watchdog on Friday.
The Australian Competition and Consumer Commission alleges that Murray Goulburn Cooperative Co Ltd breached Australian consumer law through representations to its southern milk region dairy farmers about the expected farm-gate milk price.
The case relates to representations made by Murray Goulburn between June 2015 and April 2016 about what it expected to pay farmers during the 2015-16 financial year, the ACCC chairman, Rod Sims, said in a statement on Friday.
In April 2016, Murray Goulburn and Fonterra cut their farm-gate prices for the previous 11 months, leaving dairy farmers owing thousands of dollars each.
Victorian dairy farmers faced having prices of milk solids cut from $6/kg to as low as $4.75/kg, prompting a federal government assistance package with $555m of concessional loans.
“The farmers relied on Murray Goulburn’s representations and were not expecting a substantial reduction in the farm-gate milk price, particularly so close to the end of the season when it was not possible for them to practically readjust their expenditure,” Sims said.
The ACCC alleges Murray Goulburn’s conduct was unconscionable because it:
- knew that farmers relied on information about opening and forecast final farm-gate prices to make significant business decisions;
- was aware that many farmers were unable to easily switch milk processors, particularly those contracted to Murray Goulburn;
- created an expectation that the opening farm-gate would be set conservatively and would be a minimum price and that the final price would be higher;
- knew that farmers expected that it would update the forecast final price regularly to reflect material changes; and
- provided and maintained final price forecasts despite knowing that these forecasts were overstated and unachievable in the 2015-16 financial year.
“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,” Sims 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 will not seek a pecuniary penalty as Murray Goulburn is a cooperative and such a penalty could “directly impact on the affected farmers”. Instead it will seek declarations, compliance program orders, corrective notices and costs.
The regulator alleges that the former managing director Gary Helou and the former chief financial officer Bradley Hingle were “knowingly concerned” in the conduct, and it will seek pecuniary penalties, disqualification orders and costs against the pair.
In a statement to the ASX, Murray Goulburn said it had been notified of the proceedings. “[Murray Goulburn] is considering the proceedings, however notes that ACCC has decided not to seek a pecuniary penalty against [it].”
The Australian Dairy Farmers interim chief executive, John McQueen, welcomed the case, which he said recognised that “dairy farmers need to be treated much more fairly than they have been in the past”.
McQueen said adoption of a code of practice being negotiated with producers and farmers, and almost ready for signing would go a long way to ensuring last year’s price reductions would “lead to more transparency”.
Labor’s agriculture spokesman, Joel Fitzgibbon, said dairy farming families were still reeling from Murray Goulburn’s “outrageous behaviour” and would take little comfort from the ACCC case.
He said the belated prosecution “will not help farming families one bit ... [because] the farmers own Murray Goulburn so any prosecution ... is an action against them”.
Fitzgibbon said the government should have joined Labor in 2016 to call on Murray Goulburn to use its discretion to divert profits from unit-holders to farmers through a higher farm-gate price.
The ACCC has decided not to take any further action against Fonterra Australia Pty Ltd in relation to the step-down of its farm-gate price, announced one week after Murray Goulburn’s revised final price 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 farm-gate milk price from quite early in the season,” Sims said.
