The Australian Competition and Consumer Commission has confirmed a draft decision to grant authorisation* for Premium Milk Supply Pty Ltd to collectively bargain farm-gate prices and milk standards with Pauls Limited on behalf of participating South East Queensland dairy farmers.
In granting final authorisation the ACCC recognised that there is benefit in smoothing the transition from a regulated to a deregulated market by providing farmers with an opportunity to develop skills and experience so that they can successfully operate in a commercial environment.
The proposed arrangements are also considered likely to deliver other public benefits due to efficiencies from transaction cost savings and by encouraging new investment necessary for farmers to operate in a more competitive market.
The ACCC concluded that there are competitive forces that would negate the likelihood that any higher prices negotiated by Premium would be passed on to consumers. In particular, Pauls is able to purchase milk outside the collective arrangements and the producer members of Premium are able to opt out of the collective arrangements to negotiate individually with Pauls or another processor. In addition, competitive pressures at both the processing and retail sectors are a factor.
The ACCC delayed its consideration of the final determination to allow Premium to provide it with the rules agreed between Premium and Pauls under which collective bargaining will occur. At the time the ACCC issued its draft determination, the Commission also granted interim authorisation that enabled the parties involved to engage in the proposed conduct prior to the final determination being issued.
*The ACCC has the function, through the authorisation process, of adjudicating on certain anti-competitive practices that would otherwise breach the Trade Practices Act. Authorisation provides immunity from court action, and is granted where the ACCC is satisfied that the practice delivers offsetting public benefits. Applications for authorisation are considered on a case by case basis. The onus is on the applicant to demonstrate that there is public benefit arising from the conduct and that the public benefit outweighs any public detriment. The Act requires the Commission to first issue a draft determination, prior to issuing a final determination. Authorisation, once granted, does not compel parties to participate in the proposed arrangements.