The Australian Competition and Consumer Commission (ACCC) released an interim report with recommendations for the dairy industry, following an inquiry.
The ACCC said a mandatory code of conduct should be considered for the dairy industry to address problems including power imbalances between processors and farmers.
The inquiry found that dairy farmers are paid the same amount for their milk, despite what bottle it ends up being sold in whether that be a $1 per litre bottle, or a more expensive branded milk.
ACCC Commissioner Mick Keogh said: “What’s clear is that processors, often under pressure from supermarkets or export market competition, use their relative bargaining power to shift risks onto dairy farmers”
“The power imbalance is evident in the nature of contracts between the processors and farmers. These involve uncertain pricing information and contract terms which deter switching,” he said.
“A code would strengthen dairy farmers’ weak bargaining position and therefore improve competition at the farm gate.”
While there was a recent introduction of a voluntary code, the ACCC said it has improved contract terms but it doesn’t go far enough.
“There’s been some improvements following the introduction of the voluntary code but, in the ACCC’s view, it is unlikely to fully address the issues that cause detriment in the industry in the longer term,” Mr Keogh said.
“The voluntary code is not enforceable and processors can choose to not participate or not comply, and there are no negative consequences.”
The ACCC gave eight recommendations that arose from its investigation. It is seeking feedback on the interim report by January 31st 2018 before releasing its final report in April 2018.