Horticulture industry gets new code

From April 1, 2017 the new code introduced a mandatory obligation for growers and wholesalers buying or receiving produce from them, to act in good faith or risk an infringement notice of $9000 for businesses and $1800 for individuals.

Coupled with the immediate introduction of infringement notice financial penalties, some breaches of the new code could incur potential fines of up to $54,000 if the Australian Competition and Consumer Commission (ACCC) decide an offence is serious enough to take an offender to court, rather than issue a notice.

A requirement for wholesale buyers or agents to publish terms of trade and to have written horticulture produce agreements in place for transactions with growers, record keeping changes and largely unchanged dispute resolution processes of the new code, also took immediate effect.

The new code also applies to previously exempt long-standing agreements with growers, signed before December 15, 2006, when the original code was introduced.

Buyers or agents will have a 12-month “transition period” to update those agreements to meet new code requirements.

Any new or revised agreements must comply with the new code.

The code applies to trading in unprocessed fruit and vegetables, including mushrooms and other edible fungi, nuts, herbs and other edible plants, but excludes nursery products.

It does not apply to retailers buying direct from growers – those agreements will be reviewed under another code – to exporters or to processors buying raw materials.

ACCC commissioner Mick Keogh said the requirement for parties to act in good faith and for traders and agents to provide clear documentation of their general trading terms and have written agreements with farmer clients, would avoid much of the commercial uncertainty that existed previously.

“Farmers producing fruit and vegetables have been given increased protection under the horticulture code as it improves competition and commercial practices in fresh fruit and vegetable markets in Australia,” Mr Keogh said.

“The code will apply to all transactions between farmers and agents or merchants, regardless of when any trading agreement was put in place – this is a real win for farmers,” he said.

“Infringement notices will allow the ACCC to quickly deal with conduct it believes breaches the code, while tougher court penalties should provide a stronger deterrent than was the case under the (old) code.

“Farmers deserve fairness and honesty from their trading partners and the good faith requirement will help ensure they aren’t subjected to illegitimate business conduct.

“The good faith requirement will also bring the horticulture code into line with the Food and grocery and franchising codes, which have similar provisions,” Mr Keogh said.

A 2015 review of the 2006 code identified a number of major deficiencies which the revised code sought to address.

Wholesaler submissions to the review complained of variable produce quality and delivery, while grower submissions complained of transparency issues related to when payment for consignments was due and who bore the cost of unsold produce.

Under the new code growers and wholesaler traders and agents will have to keep some records for at least six years.

Growers can use a formula or method to determine pricing and they will no longer have to formally sign a horticulture produce agreement to accept it – a written acceptance, on an email to the wholesaler for example, is now deemed sufficient recognition of commercial terms.

A trader cannot act as both an agent and a merchant under one horticulture produce agreement and must accept produce delivered under the agreement unless there is an agreed clause allowing them to reject it.

A trader rejecting produce must notify the grower within 24 hours and traders must exercise reasonable care and skill in handling and storing growers’ produce under their control.

Traders are also required to pay growers for produce within the specified time and agents must act in grower clients’ best interests when selling produce.

Transaction details must be provided to growers by traders in a statement.