Australian competition and consumer law update for food & beverage sector

Competition and Market Regulation Update

By:

The Australian Competition and Consumer Commission (ACCC) recently released its Compliance and Enforcement Policy for 2017. The compliance and enforcement priorities that are likely to be most relevant to businesses in the agriculture, food and beverage sector are:

  1. Competition and consumer law issues in the agriculture sector
  2. The extended unfair contract terms regime
  3. Industry codes of conduct, including the Franchising Code, the Food and Grocery Code and the Horticulture Code
  4. Providing education to business and consumers in relation to new country of origin labelling laws

Competition and consumer law issues in the agriculture sector

What is the focus?

The ACCC's policy does not specify which activities in the agriculture sector it will target. However, based on information available in relation to the ACCC's market studies, we consider these activities may focus on the following kinds of business practices or issues:

  • For the dairy industry, the terms of commercial arrangements between participants at different levels of the supply chain and processes involved in determining the farmgate and retail price of milk
  • For the beef and cattle industry, issues around price reporting and carcase grading, and issues affecting competition in saleyard auctions

Why is it relevant to the agriculture, food and beverage sector?

This priority is relevant to any businesses working in the agriculture sector.

The ACCC has stated that it will be devoting more resources to cases involving conduct that is associated with a substantial lessening of competition (as distinguished from cases associated with a per se prohibition). It has said that the agriculture sector will be a particular focus in this regard and that it expects to launch some cases alleging breaches of the Competition and Consumer Act (Act) by some firms in this sector.

What should businesses do about it?

Businesses should:

  • Look out for the ACCC's findings in its dairy inquiry, review the ACCC's Final Report on its cattle and beef market study, and consider whether the ACCC identifies any potentially unlawful practices that are relevant to their business
  • Consider whether any of their business practices, such as their approach to negotiations or their distribution models, raise any competition or consumer law risks including in relation to:
    • price-fixing or bid-rigging
    • exclusive dealing or other arrangements that may substantially lessen competition in a market
    • unfair contract terms or unconscionable conduct
  • Review their existing competition and consumer law compliance programs and consider how ready their business is to deal with any ACCC investigation (see our guide below)

Unfair contract terms

What is the focus?

The ACCC has announced that it will be aiming to establish the breadth of the new unfair contract terms law that applies to small business consumer contracts. The ACCC has stated that it will take enforcement action in relation to unfair contract terms matters this year.

Why is it relevant to the agriculture, food and beverage sector?

Standard form contracts are common in the agriculture, food and beverage sector including:

  • Many contracts used by franchisors are standard form contracts
  • Farmers' milk supply agreements may be standard form contracts involving a small business
  • Distribution agreements with retailers or wholesalers may be standard form contracts

What should businesses do about it?

Businesses should consider whether the new regime applies to any contracts they are a party to. To read more about which small business contracts the unfair contract terms regime applies to, read our previous update.

It is also important to be aware of the terms that the ACCC has stated may be more at risk of being considered unfair such as terms that:

  • Allow one party to unilaterally vary key aspects of the contract without much limitation
  • Provide one party with broad and unreasonable powers to protect itself against loss or damage at the expense of the other party
  • Provide one party with unreasonable rights to end the contract

Industry Codes of Conduct

What is the focus?

The ACCC will focus on ensuring that small businesses receive the protections of industry codes of conduct such as the Food and Grocery Code.

It is unclear which tools the ACCC will use to achieve this objective. For example, the ACCC may choose to take enforcement action in relation to breaches of the codes and/or increase the number of industry code audits it conducts.

Why is it relevant to the agriculture, food and beverage sector?

Although the Act contains a number of measures aimed at addressing imbalances in bargaining power, the industry codes specifically aim to address common commercial issues in particular industries such as the franchising and food and grocery industries. Therefore, practices that may not be at risk of contravening the general prohibitions of the Act may still be at risk of infringing the tailor-made industry codes.

What should businesses do about it?

Businesses should familiarise themselves with their obligations under any applicable industry codes and, if required, review their existing compliance programs and consider whether their employees require further training on compliance with industry codes.

Country of origin labelling requirements

What is the focus?

The ACCC has said it will continue its educational activities to support businesses during the transition period following the introduction of the new country of origin labelling system. The law came into effect in June 2016 and businesses have until 1 July 2018 to change their labels.

Why is it relevant to the agriculture, food and beverage sector?

The new law applies to food sold in retail stores in Australia and imposes obligations on businesses making representations that food was either produced, grown or made in Australia. It also imposes obligations on the labelling of most imported food products.

What should businesses do about it?

Businesses should:

  • Read about how to get the new labels and ensure that their food labels comply with the new laws by 1 July 2018
  • Be aware that the general provisions of the Australian Consumer Law continue to apply to prohibit businesses from making false and misleading representations including in relation to the composition of a good and the history of a good

On the horizon…

While it is unknown when the ACCC will take action in relation to the matters referred to above, the following developments already have indicative dates:

  • Over the next few months the ACCC will conduct public forums and hearings in relation to its Inquiry into the dairy industry. This is an opportunity for dairy farmers to discuss their issues directly with the ACCC. Information on the forums is available on the ACCC website
  • The final report in relation to the Australian Consumer Law Review (ACL) is expected to be provided to consumer affairs ministers by March 2017. The report will make findings and identify options to improve the efficiency and effectiveness of the ACL. Additional information about the review is available online