A report into bargaining power imbalances in the domestic supply chains of perishable agricultural goods has found examples of one-sided contracting practices, inefficient allocation of risk and a lack of price transparency.
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The Australian Competition and Consumer Commission's report was directed to look into harmful conduct in the perishable agricultural goods industry, which includes meat products, eggs, seafood, dairy and horticulture goods.
The inquiry found that imbalances in bargaining power in the processer-producer relationship manifest in a range of ways.
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These include a lack of transparency in relation to prices or equality assessment processes and one-sided contracting practices, including potential unfair contract terms.
Among its four recommendations, the ACCC said an economy-wide prohibition on unfair trading practices should be introduced into Australian Consumer Law.
"Introducing a prohibition on unfair trading practices is necessary to reduce the significant harms that are not currently captured by the provision of the Australian Consumer Law," the ACCC report said.
The ACCC's studies into the dairy and wine grapes industries have revealed instances of unfair contract terms that allow a processor to unilaterally vary key elements of an agreement, such as price and quality.
The ACCC said it received a number of reports of harmful trading practices by chicken meat processors towards growers.
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One submission stated that after a major processor exited a region, the remaining processor used the opportunity to require producers to accept a decrease in payment mid-contract, despite prices having been previously agreed.
In the dairy industry, the implementation of the Dairy Code has brought positive change to the industry, the report said.
There is increased transparency of prices and contracting arrangements, with the code reducing barriers to farmers switching between processors, which encourages competition.
Treasurer Josh Frydenberg, Minister for Agriculture David Littleproud and Assistant Treasurer Michael Sukkar released a joint press release welcoming the report and its recommendations.
"The government is progressing a number of initiatives that support the findings and recommendations of the ACCC, including legislation to strengthen unfair contract term protections, enhancing the Food and Grocery Code of Conduct and improving price transparency for the dairy industry.
Woolworths and Coles make up 65 per cent of Australia's supermarkets, which creates a tough bargaining and negotiating environment for processors and wholesalers, the report said.
"Profit margins of processors have decreased substantially over time in perishable agricultural goods.
"While consumers may benefit from these practices, value is being removed from these industries to the ultimate detriment of producers."
Strengthening the Food and Grocery Code, including making it mandatory for retailers and wholesalers, has been recommended by the ACCC.
"Signatories should not be able to contract out of protections under the code, given it is intended to address the fact that retailers and wholesalers hold the bargaining power in negotiations with suppliers," the recommendation said.
The Food and Grocery Code is a voluntary code that governs conduct by grocery retailers and wholesalers in their dealings with suppliers.
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