FRUIT and vegetable industry groups have largely welcomed the federal government's response to the Horticulture Code of Conduct review but acknowledge the details of the final Code will be telling.
Ausveg gave a swift thumbs-up yesterday to the revisions in the government's released response.
Ausveg chief executive officer, James Whiteside, said the code had been in need of reform for many years to make it more relevant to growers.
"It’s great to see the government taking the review’s key recommendations on board and committing to increasing transparency and accountability under the code,” Mr Whiteside said.
Mr Whiteside made particular mention of the government's intention to introduce civil penalty provisions for key aspects of the code, enhancing the enforcement tools available to the Australian Competition and Consumer Commission by allowing it to impose fines for breaches of the code.
“The announcement of civil penalties means there are now greater recourses available for all parties who have suffered from behaviour which breaches the obligations laid out by the code,” Mr Whiteside said.
Wholesaler representative group, Fresh Markets Australia, was largely in support of the response, and congratulated the government for its efforts in seeking to achieve a balanced, commercial outcome in its review.
FMA executive director, Andrew Young, said there were concerns with just two areas, with the Government not supporting the inclusion of deeming provisions in the Code, while at the same time supporting the inclusion of monetary penalties.
According to FMA, the lack of deeming provisions, which provide for deemed Code compliance when a grower continues to supply product to a wholesaler when they have not returned a signed terms of trade document, can also mean that a grower can unintentionally force a wholesaler to breach the Code.
“FMA believes that the inclusion of monetary penalties will be anti-competitive as these provisions will apply to just one sector of the Industry,” Mr Young said.
“It is noted that similar monetary penalties do not exist under the voluntary Food and Grocery Code which applies to the retail chains, while there is no regulation of other retailers buying direct from growers.
"There is therefore a significant risk that the Code will be anti-competitive. Accordingly, penalties must only be applied in extreme cases where there has been systematic, repeated and blatant breach of the Code."
Queensland horticulture group Growcom applauded the government's "commonsense" response.
Growcom chief advocate, Rachel Mackenzie, said the reforms would enhance transparency and accountability in transactions between growers and wholesaler while enabling more flexibility in individual transactions.
“Growcom was very pleased that government has supported recommendations made by the review to include civil penalties and infringement notices. This will give the ACCC some teeth when dealing with breaches of the Code," Ms Mackenzie said.
“The government response recommending that all contracts, including those entered into before December 2006, be subject to the provisions of the Code will improve uptake across the whole sector.
She said there were some significant details to be worked through before the actual Code is amended, including determining what activities will result in civil penalties.
"Overall the reforms seem sensible and balanced," Ms Mackenzie said.
“The wholesale markets are an extremely important component of the horticulture supply chain and we hope that a reformed Code of Conduct will ensure growers and wholesalers operate effectively and transparently with each other but also have the flexibility to engage in mutually beneficial trading arrangements."
Details will matter
FMA's Mr Young said the devil would be in the detail and, as yet, FMA had not seen the draft new Code.
“While the actual detail of the new regulations is yet to be released, we certainly look forward to continuing to work with the Government and grower representative organisations to see a timely and seamless introduction of the new workable Code,” Mr Young said.
The Victorian Farmers Federation (VFF) welcomed the government’s commitment to implement measures such as a requirement that all parties “act in good faith” and that agreements entered into prior to December 2006 will now have to conform to the new Code.
VFF horticulture vice president, Emma Germano, said the group believes the government had listened to growers who have for years complained about a lack of commercial transparency in the horticulture industry.
“We have consistently been seeking a more workable Code to stop the confusion that currently exists,” she said.
The VFF also welcomed the announcement that the ACCC will produce guidelines and example templates that can be used by parties entering into agreements.
But Ms Germano said the farmer group still had concerns around the recommendation allowing a formula to determine how much growers are paid.
“We don’t want the industry to go back to the dark old days of hybrid trading, but we do take some comfort in the fact there needs to be prior mutual agreement before a formula can be used for pooling and averaging,” she said.
“Pooling and averaging is important, particularly in the pome fruit industry, where the fruit is harvested over several months but is distributed over 12 months.”
Ms Germano said that while the VFF broadly accepted the inquiry’s recommendations, it was frustrating that retailers, covered under the voluntary Food and Grocery Code, would not be subject to the new provisions in the Horticulture Code.
“We’re pleased overall with the Government’s response to the inquiry, but it’s still disappointing to see retailers able to escape the scrutiny that comes with a mandatory code,” she said.
Nearly all responding parties paid tribute to Assistant Minister for Agriculture and Water Resources, Senator Anne Ruston, for her efforts in working with a range of stakeholders to develop a more workable Code.
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How the government responded…
Recommendation 3: That an obligation on all parties to act in good faith be included in the Horticulture Code.
Recommendation 4: That the Horticulture Code be amended to allow a method or formula for determining prices paid to a grower, including pooling and price averaging where: parties have prior knowledge and agree to the method or formula in the horticulture produce agreement; if pooled, the pooled produce is of the same quality.
Recommendation 6: That the Horticulture Code be amended to require that where a horticulture produce agreement does not include specific quality specifications, FreshSpecs specifications be used as the default.
Recommendation 7: That the Horticulture Code be amended to remove the current exemption for contracts entered into prior to 15 December 2006.
Recommendation 11: That the Horticulture Code be amended to provide for civil penalties and infringement notices for breaches of the Code.
Recommendation 12: That the Horticulture Code require that traders generate and keep relevant information on transactions in order to allow the ACCC to use its powers under section 51ADD of the Competition and Consumer Act 2010 (compliance check powers) to assess a trader's compliance with the Code.
ACCEPTED RECOMMENDATIONS IN PRINCIPLE
Recommendation 13: That as part of its role in enforcing the Horticulture Code, the ACCC should engage with growers and traders industry bodies in the development and distribution of any educational information relating to amendments to the Code. Such information should be: in plain English (and other languages as appropriate); released in industry newsletters; released via an agreed timetable.
ACCEPTED RECOMMENDATIONS IN PART
Recommendation 2: That a standard form horticulture produce agreement (HPA) be annexed to the Horticulture Code, to be used as the minimum basis for trade in horticulture produce between growers and traders.
Recommendation 9: That the Horticulture Code be amended to abolish the existing dispute resolution process and that it be replaced with an improved system which recognises the need for independent, fast, accessible, expert on site conciliation.
Recommendation 5: That the Government explore the inclusion of deeming provisions in the Horticulture Code to ensure that where a pre?existing contract is not in place, and where a Horticulture Produce Agreement is provided by the trader or sought by the grower, that the intent of the parties to enter into a horticulture produce agreement is deemed to have occurred. Such provisions should ensure that parties have time to arrange their affairs and that no party can use such provisions to enforce unfair contract terms.
Recommendation 8: That the Horticulture Code be amended to regulate transactions between growers and retailers where the retailer is not a signatory to the Competition and Consumer (Industry Codes – Food and Grocery) Regulation 2015.
Recommendation 1: That the Horticulture Code be amended to remove the distinction between an agent and a merchant.
Recommendation 10: That the Horticulture Code be amended to provide that horticulture produce assessors be registered with the Australian Competition and Consumer Commission (ACCC) or the Australian Small Business and Family Enterprise Ombudsman, be appropriately qualified, trained, accredited (as determined by the ACCC or the Ombudsman) and capable of acting as non-determinative conciliators between the parties and recording the outcome of any resolution between the parties.
- Download the full Australian Government response to the Independent Review of the Horticulture Code of Conduct here.