Milk supply company and dairy product provider, Lactalis Australia, has contravened the Dairy Code of Conduct.
Lactalis Australia failed to meet some of its obligations in relation to the 2021-21 milk season and was ordered by the Federal Court on 25 July 2023 to pay $950,000 in penalties.
Following proceedings brought by the Australian Competition & Consumer Commission (ACCC), the Court found in September 2022 that Lactalis had breached the Dairy Code by publishing and entering into agreements that allowed Lactalis to unilaterally terminate an agreement in circumstances that didn’t involve a material breach by farmers.
In particular, under the agreement, Lactalis was permitted to unilaterally terminate the agreement when, in Lactalis’ opinion, the farmer had engaged in ‘public denigration’ of processors, key customers or other stakeholders.
Lactalis had also breached the Code by failing to publish its milk supply agreements on its website, and instead required farmers to sign up to receive their milk supply agreements by email.
“The Code was introduced to help dairy farmers make informed choices about where they sell their milk by ensuring there is transparency in pricing agreements and by allowing them to compare agreements from different processors in a timely fashion,” said ACCC Deputy Chair, Mick Keogh.
“These were the first contested proceedings under the Dairy Code and the outcome is an ongoing reminder that processors who fail to comply with the Code may face significant penalties.
“Ensuring that small businesses receive the protections they are entitled to under industry codes continues to be one of the ACCC’s enduring compliance and enforcement priorities.”
Lactalis is one of Australia’s largest dairy processors and purchases milk from more than 400 dairy farmers across all Australian states. The company produces a wide range of dairy products across a number of brands including Pauls, Oak, Vaalia and Ice Break.
The Dairy Code (the Competition and Consumer (Industry Codes—Dairy) Regulations 2019) is a mandatory industry code regulating the conduct of dairy farmers and milk processors in their dealings with one another that came into effect on 1 January 2020.
Under the Dairy Code, a processor must, by 2pm on 1 June each year, publish its standard form milk supply agreements on its website.
For every exclusive milk supply agreement, a processor publishes, a processor must also offer a non-exclusive supply option to farmers.
The Dairy Code requires processors to only purchase milk under a milk supply agreement. All agreements must comply with the code by meeting a number of key requirements, including:
- specifying a minimum price paid for the milk,
- consisting of a single document,
- specifying quality and quantity requirements, including testing procedures, and
- specifying the circumstances in which parties may unilaterally terminate the milk supply agreement – for processors to unilaterally terminate, the circumstances outlined must involve a ‘material breach’ by the farmer.
The publication obligations of the Dairy Code apply to all processors with an annual aggregated turnover of $10 million or more in the previous financial year.
Lactalis Group, based in France, claims to be the world’s leading dairy group.
Last year it acquired Jalna in Australia, positioning the business as number two in the Australia’s yogurt market.
The dairy products market is expected to continue to grow due to an increase in global population by an estimated 11 per cent by 2033. This would be approx. 873 million additional people, 35 per cent of which will be in Asia.
Each year, Lactalis collects more than 22 billion litres of milk from some 460,000 partnering farmers in 49 countries.
Generally, in Australia, Lactalis uses third-party transportation companies.
The group is mindful about optimising truck loading, reducing distances travelled and encouraging the use of alternative fuels.
In 2022, Lactalis as a group generated €28.3 billion (approx. $46.3 billion AUD) in revenue, an increase of 28.4 per cent compared to 2021. By geographical area, 50 per cent of that consolidated revenue is from Europe, 33 per cent via the Americas and 17 per cent across Africa and Asia and Pacific.
