Tougher Horticulture Code comes online

The new mandatory Horticulture Code started on April 1 and will sit under the Competition and Consumer Act 2010, to be enforced by the Australian Competition and Consumer Commission (ACCC).

Under the changes, the ACCC will have new and enhanced powers to issue infringement notices of $9000 for businesses and $1800 for individuals and seek penalties reaching $54,000 in court, if certain Code provisions are breached.

The strengthened Code has been welcomed by farmers and high ranking government officials, to help stamp-out anti-competitive behaviour in the horticulture supply chain.

When the Code first started over a decade ago, it was introduced in response to concerns about predatory, anti-commercial behaviour by agents and traders against fruit and vegetable farmers.

But changes to update its powers and improve enforcement capacity, to protect both growers and retailers, have resulted from an independent review, commissioned by the Coalition government in 2015, which identified major deficiencies and loopholes.

The ACCC says a 12-month transition period will allow the industry time to adapt their existing arrangements to the new Code.

However, by April 1, 2018, all existing agreements between farmers and agents and wholesalers must be compliant with the new Code.

But any agreement made or renewed after April 1 this year must be compliant with the Code immediately.

At the time of the government’s response to the independent review in February this year, Assistant Agriculture and Water Resources Minister Anne Ruston said a core recommendation - accepted by the government - would see the code amended to remove a current exemption for any contracts entered into prior to December 15, 2006.

She said the Coalition decided to review the Code because a situation existed where about 85 per cent of traders and growers weren’t captured by its powers, due to the exemption on pre-existing contracts.

“You had this situation where you had a code that applied to 15pc of the people that it was supposed to cover, rendering it pretty much toothless and unfair on those bound by it,” she said.

“Through a process of negotiation and consultation with growers, traders, merchants and the wholesalers, we’ve got them to agree that it’s a sensible thing to remove that exemption from the Code.

“That’s the fundamental centrepiece that needed to be done but while we’re at it, we’ve also made a number of other changes to the code to make it more contemporary, for 2017.”

Senator Ruston said the Code was also being revised to make growers take more responsibility for their contractual arrangements “so that it’s not just this perception that we’re trying to beat up on the traders and regulate the traders”.

“It’s actually turning the code into a useful document so it can provide for better relationships and a better basis for trade arrangements on both sides of the trade - not singling out one side or the other,” she said.

Federal Agriculture and Water Resources Minister Barnaby Joyce said horticulture was the third largest agriculture industry worth over $9 billion to the Australian economy, employing around 67,000 people and the Coalition government believed it was important, “we do not restrict the sector’s ability to thrive”.

Mr Joyce said the government’s review had responded to concerns raised about the Code’s inefficiencies, with many growers and traders “simply ignoring it”.

“Those operating under a pre-code contract or a horticulture produce agreement will have 12 months to transition to the new code - however, by April 1, 2018 all agreements must comply with the new Code of Conduct,” he said.

Senator Ruston said unnecessary regulations had been removed and greater flexibility for growers and traders had been introduced, including in price determination and the ability to pool produce.

“The ACCC will be given greater powers to rapidly respond to breaches of the Code and it also includes an obligation to deal in good faith, which will support a more positive business relationship between growers and traders through soft mediation and avoid ending up in a legal environment,” she said.

Small Business Minister Michael McCormack has responsibility for consumer affairs within the Coalition ministry and industry codes of conduct.

He said the new Horticulture Code would bring clarity to the industry.

“The new Code strikes the right balance and will provide a fair framework for business between growers and traders in Australia’s fresh fruit and vegetables industry,” he said.

National Farmers’ Federation CEO Tony Mahar said the revised Code served to level out the playing field between farmers and large wholesalers and retailers.

Mr Mahar said contracts must be compliant with the code by April 2018 and traders and agents who do not comply risk fines of up to $54,000.

He said the NFF was particularly pleased the Code revisions also applied to pre-existing trade agreements.

“Without this revision, the new regulations would mean the majority of trade occurring in the sector would be exempt from complying,” he said.

“The positive end result of this review is a credit to all involved, including farmers, the greater horticulture supply chain and the Federal Government, in particular Senator Anne Rushton, for her role in ensuring growers are protected.”

ACCC Agricultural Commissioner Mick Keogh said from April 1 next year, the Code would 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.

He said infringement notices would 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 current 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,” he said.

“The good faith requirement will also bring the Horticulture Code into line with the Food and Grocery and Franchising codes, which have similar provisions.”