The Australian Competition and Consumer Commission has issued a draft determination proposing to authorise* collective negotiations by dairy farmers of contractual terms and conditions of raw milk supply with dairy processors.
"The proposed authorisation is a transitional step to help smooth the path to a more competitive market following deregulation of the dairy industry last year", ACCC Chairman, Professor Allan Fels, said today.
"Through easing the adjustment to deregulation, the proposed authorisation will help to ensure efficient dairy farmers remain in the industry, able to operate effectively in the new environment. In turn, this will benefit the many rural and regional communities that rely on dairying as a major source of income.
"Other benefits include a small reduction in the costs for farmers of negotiating with dairy companies and an increased ability to take advantage of new market opportunities for their milk.
"Concerns of a single national milk price resulting from the arrangements put for authorisation have led the ACCC to impose certain conditions on the authorisation. Specifically, the ACCC proposes that farmers' collectives will only be able to comprise farmers that operate within particular regions. Also, common agents will not be able to negotiate between farmers and the company.
"The ACCC considers that the detrimental effect on competition is limited. Participation in collective bargaining by farmers and companies is voluntary, processing companies may be able to source milk from competing regions, and competition between processing companies, as well as influences from the retail level, will remain. Also, world commodity prices will continue to influence the price paid for raw milk in Australia".
The proposed authorisation would run until 1 July 2005 and covers any farmers that wish to take part in collective negotiations across Australia in the terms proposed.
The ACCC also proposes to authorise the Australian Dairy Farmers' Federation's proposal to discuss separately with the major supermarket chains the consequences of tender processes on its members.
Before the release of the ACCC's final determination, the ADFF and interested parties can request a conference to discuss the operation and effect of the draft determination.
* The ACCC has the function, through the authorisation process, of adjudicating on certain anticompetitive 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. Authorisation, once granted, does not compel parties to participate in the proposed arrangements.