Code of conduct a major industry worry

A report by the Australian Competition and Consumer Commission (ACCC) put the Horticulture Code of Conduct (HCC), which it administers, at the top of a list of complaints raised by fruit and vegetable growers.

ACCC deputy chairman Michael Schaper and the head of its agriculture consultative committee, commissioner Mick Keogh, held workshops around Australia earlier this year, including one at Bunbury in June, to canvass industry views.

In relation to the HCC, their Perspectives in Horticulture and Viticulture report supported conclusions and 13 recommendations from an independent review of the code last year, but is still awaiting a federal government decision.

Their report also identified other areas to be the focus of on-going ACCC interest, including late or non-payment of growers by wholesalers, imbalance of bargaining power, influence exerted by major retailers, contract practices and fear of complaining due to retribution concerns.

"Despite the diversity of markets in horticulture and viticulture, there were a number of common concerns," Mr Keogh said.

Principal concern was the ineffectiveness of the HCC to ensure fair trade between growers and wholesalers.

The code was introduced in December 2006, with a sunset clause that will see it expire next April unless the government renews it or adopts a modified version recommended by the independent review.

It requires a written terms-of-trade agreement for each transaction.

This is known as a Horticulture Produce Agreement (HPA).

But, according to the report, the ACCC heard HPA were hardly ever used due to of a variety of reasons, including the lack of an effective compliance and penalty regime.

The report noted the ACCC does not have the power to seek court-ordered penalties or to issue infringement notices for non-compliance.

"The absence of meaningful penalties for code breaches severely limits the ACCC's ability to enforce the code and deter future non-compliance," it noted.

The report acknowledged grower concerns about a lack of transparency with agreements under the code which did not make it clear whether a buyer was acting as an agent or a merchant.

It noted some wholesalers used a "hybrid model" agreement to disguise whether they were an agent or merchant and that growers at the Bunbury and Griffiths, New South Wales, meetings considered such agreements a means by which wholesalers avoided GST obligations.

Obscure agreements also affected timing of when payment to growers was due, the report pointed out.

In it, the ACCC welcomed proposed inclusion of a clause in the code obliging parties to "act in good faith" - a recommendation of the independent review.

It endorsed a recommendation to extend the code to cover long-standing agreements that were already in place when it was introduced.

"It is clear that the horticulture code is not achieving its aims and we believe that significant changes to the code are required," Mr Schaper said.

"The code needs to have greater coverage, through the inclusion of pre-2006 agreements, and penalties and infringement notices should be available for breaches of the code to encourage widespread compliance."

Despite the code's shortcomings and grower dissatisfaction with it, the ACCC has had some success in enforcing it.

In September it accepted a court-enforceable undertaking requiring Melbourne-based fruit and vegetable wholesaler Young Sang & Co. (Aust.) Pty Ltd to comply.

The ACCC successfully alleged Young Sang breached the code when it traded in produce with Queensland growers without HPA or a publicly-available document setting out terms and conditions of its trade with them.

Similar to fruit and vegetable growers' concerns about an ineffective code of conduct, the ACCC report noted viticulturists were also concerned about the ineffectiveness of a voluntary code of conduct in their industry.

"There are also a number of contracting and competition issues in the viticulture industry that require further consideration and the ACCC's agriculture unit will be looking at these in greater detail," Mr Keogh said.

On growers' perception of an imbalance in bargaining power, the report pointed out a group of growers could seek ACCC approval to collectively bargaining with a large wholesaler or for a "collective boycott" of a wholesaler or wine merchant.

In relation to reluctance by growers to raise concerns for fear of retaliatory action by wholesalers, the report noted particular concerns passed on to the ACCC at Bunbury.

"A number of large growers in WA indicated they would have liked to attend the Bunbury workshop, but did not due to concerns about being seen to be speaking with the ACCC," it said.

"(Also) in Bunbury, multiple growers stated that they did not feel comfortable changing agents, as this may be seen as causing trouble," the report added.

The report said the issue of retribution against growers was raised at almost every workshop, but the ACCC has not been provided with specific examples.

"However, what is clear is that growers believe this type of activity occurs," it said.

The report pointed out the ACCC was happy to accept complaints on a confidential basis.

While this made enforcement actions "challenging", the ACCC had options to allow it to obtain information without revealing the identity of complainants.

These options were used successfully against Coles in the Federal Court in 2014 where it was found to have engaged in unconscionable conduct against about 200 of its smaller suppliers.

The report is available on the ACCC website.