Agriculture inquiry reveals power imbalance

A three-month long inquiry into agriculture regulations and trading practices by the Australian Competition and Consumer Commission (ACCC) has found bargaining power imbalances between farmers, processors and retailers.

The ACCC released the Perishable Agricultural Goods Inquiry Report on December 10, an examination of perishable agricultural goods markets including meat products, eggs, seafood, dairy products and horticultural goods. 

ACCC Deputy Chair Mick Keogh said, “the inquiry found that a number of features of perishable agricultural goods supply chains have the potential to cause harm to suppliers and the efficiency of markets more generally.” 

“In most perishable agricultural goods markets, there are many farmers, but few processors or wholesalers, and even fewer major retailers.”

“This makes farmers particularly vulnerable to issues stemming from limited competition at the wholesale or retail level. In addition, the more perishable a product is, the weaker the farmer’s bargaining power often is,” Mr Keogh said.

The ACCC received more than 80 submissions to the inquiry, which included conduct allegations by parties with strong bargaining power relative to their suppliers.

“We will investigate potential unfair contract terms in the chicken meat industry following this inquiry, as well as reports that some horticultural wholesalers are trading in breach of the Horticulture Code,” Mr Keogh said.

“The effects of imbalances in bargaining power can weaken confidence in markets, reduce incentives to invest, and result in slower productivity growth,” Mr Keogh said.

To address economy-wide unfair trading practices, the report recommends the introduction of an unfair trading practices prohibition, the strengthening of the small business unfair contract term protections and making the Food and Grocery Code of Conduct mandatory.

“Australian governments and agencies are already discussing a potential prohibition on unfair trading practices, and the findings of our report are further evidence that it’s needed,” Mr Keogh said.

The ACCC also recommended that governments and industries should explore measures to increase price transparency in perishable agricultural goods industries, in order to increase competition.

Xavier Martin, NSW Farmers Vice President said the report and the Federal Government’s response could lead to positive change for farmers in these industries. 

“We have known about competition failures impacting farmers for some time now, and this has formed a key pillar of our advocacy,” Mr Martin said. 

“Dairy, poultry meat and horticulture farmers are bearing the brunt of supply chain inequities, whether that be due to disproportionate power at the retailer or processor level, or both.”

“In the poultry meat industry, the loss of competition at the processing level in NSW has left farmers with little to no bargaining power, which can result in them accepting contracts with unfair terms.”

“We’ve seen farmers unable to contract their sheds, making their million dollar investments redundant.”