AUSTRALIAN COMPETITION TRIBUNAL

 

Application by National Foods Ltd [2002] ACompT 3


TRADE PRACTICES – authorisation – application to the Australian Competition Tribunal under s 101 of the Trade Practices Act 1974 (Cth) to review a determination by the ACCC – parties seeking determination by consent to vary conditions attaching to the authorisation – whether appropriate to make a determination by consent under s 101(1A) of the Trade Practices Act.


APPLICATION BY NATIONAL FOODS LTD – File No 2 of 2002

 

 

 

 

 

 

 

JUSTICE von DOUSSA, PROF R C DUNCAN, MR G F LATTA

MELBOURNE

16 AUGUST 2002



IN THE AUSTRALIAN COMPETITION TRIBUNAL

 

File No 2 of 2002

 

RE:

APPLICATION FOR REVIEW OF A DETERMINATION OF THE ACCC MADE ON 12 MARCH 2002 IN RESPECT OF AN AUTHORISATION TO ENABLE COLLECTIVE NEGOTIATION BY DAIRY FARMERS OF CONTRACTUAL TERMS AND CONDITIONS WITH DAIRY PROCESSING COMPANIES

 

BY:

NATIONAL FOODS LTD

(ACN 004 486 631)

 

TRIBUNAL:

JUSTICE von DOUSSA (PRESIDENT)

PROFESSOR R C DUNCAN

MR G F LATTA

 

DATE OF ORDER:

16 AUGUST 2002

WHERE MADE:

MELBOURNE

 

THE TRIBUNAL DETERMINES BY CONSENT THAT:

 

1.                  The determination of the Australian Competition and Consumer Commission (the Commission) dated 12 March 2002 in respect of Authorisation A90782 is varied such that authorisation is granted to application A90782 in the following terms.

2.                  Subject to the conditions C1 to C12 stated in par 3 of this determination:

(a)                groups of dairy farmers are authorised to form collective bargaining groups through which they may collectively negotiate terms of supply, including pricing, with a dairy processing company that each member of the group wishes to supply;

(b)               the Australian Dairy Farmers Federation (the ADFF) is authorised to hold general, non-specific, discussions with supermarkets, on an individual and voluntary basis, regarding the impact of tender processes on dairy farmers.

3.                  Pursuant to s 91(3) of the Act, authorisation is subject to the following conditions.

C1       ADFF or any other common agent (including a farmer) is not to be involved in price and supply negotiations between dairy farmers and dairy processing companies.

C2       Collective bargaining groups can only be formed by dairy farmers that have a “shared community interest”.  Dairy farmers will have a shared community interest for the purposes of this authorisation where they have a common interest in being long-term suppliers acceptable to the processor concerned and satisfy one of the following criteria:

(a)               the dairy farmers all have similar supply patterns and are all located within a distance in which milk can economically be delivered to that processor’s plant;

(b)              the dairy farmers supply a specialty raw milk product.

For the purposes of C2 there are two general categories of “supply patterns”:

·                   seasonal supply;  and

·                   all year round supply.

C3       Dairy farmers that satisfy one of the criteria in C2 can form cross-regional collective bargaining groups, however these groups must not comprise all of the dairy farmers that operate within any of the following regions: 

·                   Far north Queensland;

·                   Central Queensland;

·                   Southeast Queensland;

·                   Northern New South Wales;

·                   Central New South Wales;

·                   Southern New South Wales;

·                   Western Victoria;

·                   Eastern Victoria;

·                   Northern Victoria;

·                   South Australia;

·                   Western Australia;  and

·                   Tasmania.

C4       Dairy processing companies are free to choose whether or not to negotiate with collective bargaining groups of dairy farmers.  Dairy processing companies are free to negotiate with one, or some, of the dairy farmers within a particular group based on their own commercial requirements. 

C5       Dairy farmer participation in collective bargaining groups is voluntary.  Farmers retain the right to negotiate and enter into individual contracts with dairy processing companies.  Farmers can leave collective groups on giving reasonable notice.

C6       Collective bargaining groups of dairy farmers, individual farmers or farmer representatives may not prevent or restrict other farmers from supplying particular dairy processing companies.

C7       Each member of a collective bargaining group must not discuss its confidential negotiations with a particular dairy processing company with members of other collective bargaining groups, individual farmers outside the group or other farmer representatives.  Members of collective bargaining groups may not disclose information obtained in negotiations with dairy processing companies, that at least one party considers to be confidential, to members of other collective bargaining groups, individual farmers outside the group or other farmer representatives.  If a member of a collective bargaining group participates in another collective bargaining group, that member must not disclose information that at least one of the parties considers to be confidential and obtained as a result of participating in the former collective bargaining group to members of the latter collective bargaining group.

C8       All collective bargaining groups must notify ADFF of the names and locations of the farms comprising that group, including the shared community of interest criteria that the group satisfies.  ADFF must be notified of any changes to the composition of collective bargaining groups.

C9       ADFF must maintain a register of collective bargaining groups including the names and locations of all farms comprising each group.  This register is to be kept up to date.

C10     ADFF must allow any dairy processor and the Commission, upon their request, access to the register free of charge during normal business hours.

C11     Parties to the authorised arrangements must provide the Commission with any contract that is entered into under these arrangements upon the Commission’s request.

C12     Dispute Resolution

12.1     Processors and Collective Bargaining Groups (CBGs) will cooperate to ensure that any disputes in relation to the formation of CBGs or the negotiation of contracts between processors and CBGs are resolved promptly and efficiently by mutual negotiation.  Where a dispute arises, the party complaining (Complainant) will prepare a written complaint (the Complaint) setting out:

(a)                the nature of the dispute;

(b)               what outcome the Complainant wants;  and

(c)                what action the Complainant thinks will settle the dispute,

and will deliver the Complaint to the other party.

12.2     Reference to Mediator

On delivery of a Complaint, processors and CBGs must make all reasonable efforts to resolve the dispute.  Within eight weeks of receipt of a Complaint, the party receiving the Complaint must respond in writing to the Complainant.  If the dispute is not resolved within eight weeks, either party may refer the matter to a mediator.

            12.3     Mediator

                        In the event of a dispute between the parties being referred to a mediator, the mediator must be a suitably qualified independent person, experienced in the milk industry, agreed upon between the parties (or, in default of agreement, appointed by the person for the time being President of the relevant state Law Society or equivalent).

            12.4     Costs of Mediation

                        The parties shall be equally liable for the costs of the mediation and must pay their own costs of attending the mediation.

            12.5     Terms of Mediation

                        In relation to any mediation:

(a)          everything that occurs in the course of the mediation will be in confidence;  and

(b)         all discussions will be without prejudice.

12.6     Court proceedings

                        If no agreement can be reached by the parties by means of mediation under this clause within eight weeks of the dispute being referred to mediation (or such longer period as the parties agree), either party may refer the dispute to the courts.

4.         In this determination the terms “processor” and “dairy processing company” include any legal entity that acquires raw milk from dairy farmers for the purpose of supplying that milk to a dairy processing company for processing.

5.         The authorisation granted by this determination is effective until 1 July 2005.

6.         Pursuant to subs 88(6) of the Act, the authorisation of the collective bargaining arrangements has the effect as if it were also an authorisation in the same terms to every other person named or referred to in the application as a party to the contract, arrangements or understanding, i.e. all Australian dairy farmers.

7.         Pursuant to subs 88(10) of the Act, the authorisation of the collective bargaining arrangements applies to or in relation to farmers who become parties to the proposed arrangements at a time after the authorisation is granted. 

8.         Pursuant to subs 88(13) of the Act, the authorisation applies to any collective bargaining arrangements entered into by groups of dairy farmers across Australia in accordance with the conditions outlined in par 3 above. 

9.         The Tribunal notes that this authorisation does not compel any party to participate in collective bargaining.  Nor will it impact, unless the parties so choose, on arrangements that are currently in place between dairy processing companies (including cooperatives) and their dairy farmer suppliers. 



IN THE AUSTRALIAN COMPETITION TRIBUNAL

 

File No 2 of 2002

 

RE:

APPLICATION FOR REVIEW OF A DETERMINATION OF THE ACCC MADE ON 12 MARCH 2002 IN RESPECT OF AN AUTHORISATION TO ENABLE COLLECTIVE NEGOTIATION BY DAIRY FARMERS OF CONTRACTUAL TERMS AND CONDITIONS WITH DAIRY PROCESSING COMPANIES

 

BY:

NATIONAL FOODS LTD

(ACN 004 486 631)

 

TRIBUNAL:

JUSTICE von DOUSSA (PRESIDENT)

PROFESSOR R C DUNCAN

MR G F LATTA

 

DATE:

16 AUGUST 2002

PLACE:

MELBOURNE


REASONS FOR DECISION

THE TRIBUNAL:

1                     National Foods Limited (NFL) has applied to the Australian Competition Tribunal (the Tribunal) under s 101 of the Trade Practices Act 1974 (Cth) (the Act) to review a determination of the Australian Competition and Consumer Commission (the Commission).  The Commission’s determination dated 12 March 2002 was made on an application by the Australian Dairy Farmers Federation (ADFF) seeking authorisation, among other things, for dairy farmers to collectively negotiate contractual terms and conditions with dairy processing companies.

2                     NFL opposed the ADFF’s application before the Commission, and in particular expressed concern about the formation of bargaining groups that would alter the balance of power in negotiations in an anti-competitive way.  The Commission, in its determination granting authorisation, acknowledged that significant anti-competitive effects, including those identified by NFL, would likely result from the proposed conduct.  However, in an effort to alleviate those anti-competitive concerns to the point where authorisation was appropriate, the Commission imposed eleven conditions on the authorisation pursuant to s 91(3) of the Act.

3                     In the Commission’s view those conditions sufficiently reduced the anti-competitive effect of the authorised conduct to satisfy the test in s 90(6) of the Act.  Section 90(6) requires that the Commission be satisfied that the conduct proposed to be authorised would result, or be likely to result in a benefit to the public, and that that benefit would outweigh the detriment to the public constituted by any lessening of competition that would result, or be likely to result. 

4                     NFL’s central concern in its application to the Tribunal is the inadequacy of the imposed conditions to achieve what the Commission intended.  NFL spelled out the reasons for its concern in its application.

5                     NFL brings this application as a party with a sufficient interest within the meaning of s 101(1AA) of the Act.  Plainly it fulfils that criteria.  Other parties to the application are ADFF, which was the original applicant for authorisation, and the Commission. 

6                     Upon the application being filed with the Tribunal, and pursuant to a direction from the President, notice of the application was given to all those people and organisations who had expressed an interest in the matter before the Commission.  Those people and organisations have the right to participate in the proceedings before the Tribunal if they have a sufficient interest.  However, none of them has filed an address for service, nor sought to intervene.

7                     Since this application was commenced, the parties presently before the Tribunal, (NFL, ADFF and the Commission) have conferred, and as a result of fruitful negotiations have come forward with a consent determination which they now invite the Tribunal to make pursuant to s 101(1A) of the Act.  That section provides:

“Where a person has, whether before or after the commencement of this subsection, made an application under subsection (1) for a review of a determination, the Tribunal may, if the Tribunal determines it to be appropriate, make a determination by consent of the applicant, the Commission, and all persons who have been permitted under subsection 109(2) to intervene in the proceedings for review, whether or not the Tribunal is satisfied of the matters referred to in subsection 90(6), (7), (8) or (9).”

8                     The consent determination seeks to vary the conditions imposed by the Commission on its authorisation in a way that limits the authorised conduct to a greater extent than under the Commission’s determination.

9                     Counsel for the Commission contends that in considering whether it is “appropriate” to make a consent determination under s 101(1A) the Tribunal should consider four issues.  We agree that the four issues which the Commission has identified should be considered. 

10                  First, the Tribunal should consider whether the consent determination is within the power of the Tribunal under s 102(1) of the Act.  That subsection prescribes the functions and powers of the Tribunal.  Upon a duly made application the Tribunal may make a determination affirming, setting aside or varying the determination of the Commission and for the purposes of the review may perform all the functions and exercise all the powers of the Commission.  For present purposes, the powers include a power to vary the determination.  That is what the consent determination seeks to achieve.  The making of the consent determination would be within power.

11                  Secondly, the Commission submits that the Tribunal must be satisfied that the procedures envisaged by the Act for making an application for authorisation, and for seeking a review, have been fulfilled.  In this case the procedures which govern the way in which the Commission should address an application for authorisation were all fulfilled, including those conditions that give interested parties the opportunity to make submissions and to be heard.  Further, the application to this Tribunal was duly made and the people and organisations who expressed an interest before the Commission have been notified.  They have had the opportunity to participate in these proceedings but have not done so.  Significantly, no-one (apart from NFL) has expressed any dissatisfaction with the terms of the authorisation given by the Commission, and, as we have indicated, the consent determination proposed seeks to further limit the authorised conduct.

12                  Thirdly, the Commission submits that the consent determination must not contain terms that contravene any other law.  In this instance there was no suggestion that the terms would do so. 

13                  Finally, the Commission submits that the terms of the consent determination must not be such as to suggest that the determination would be inconsistent with the public benefit test envisaged by subs 90(6) of the Act.  It is plain from the terms of s 101(1A) that the Tribunal is not required to conduct a full hearing to satisfy itself that on the merits the conduct to be authorised by the consent determination meets the statutory test.  However, as was indicated in Real Estate Institute of Australia Limited [2000] ACompT3 at [16], the statutory test is a matter to be borne in mind and the Tribunal must have a general regard to it.

14                  In support of today’s hearing both NFL and the Commission have filed written submissions which they have enlarged upon orally.  These submissions address the question of public benefit and detriment.  Questions have been addressed by the Tribunal to the parties.  We see no reason to think that the proposed consent determination would be inconsistent with the statutory test. 

15                  There was one consideration raised by Mr Latta about an aspect of possible detriment to NFL, the answer to which is not entirely clear to us.  However, we do not think that is a reason for not acceding to the request that we should make the consent determination.  It is plain that the parties have given close consideration to the issues that would arise in a practical sense under the authorisation that is proposed.  NFL is the party that initially expressed concern about operation of the conditions attached to the authorisation.  We are assured by counsel for NFL that its concerns have been addressed.  We feel that our lack of full understanding about the issue that Mr Latta has raised is probably the consequence of us not having the same degree of knowledge as the parties about the way in which the new conditions will operate in the factual circumstances that exists from State to State and region to region.  We are not required, as we have said, to form a final view on the merits.  We rely upon the parties’ assurance that the matter raised by Mr Latta is not material. 

16                  Having considered the submissions of the parties, we are satisfied that it is appropriate to make a determination by consent in the terms proposed.  The Tribunal therefore makes the following determination by consent:

1.         The determination of the Australian Competition and Consumer Commission (the Commission) dated 12 March 2002 in respect of Authorisation A90782 is varied such that authorisation is granted to application A90782 in the following terms.

2.         Subject to the conditions C1 to C12 stated in par 3 of this determination:

(a)                groups of dairy farmers are authorised to form collective bargaining groups through which they may collectively negotiate terms of supply, including pricing, with a dairy processing company that each member of the group wishes to supply;

(b)               the Australian Dairy Farmers Federation (the ADFF) is authorised to hold general, non-specific, discussions with supermarkets, on an individual and voluntary basis, regarding the impact of tender processes on dairy farmers.

3.         Pursuant to s 91(3) of the Act, authorisation is subject to the following conditions.

C1       ADFF or any other common agent (including a farmer) is not to be involved in price and supply negotiations between dairy farmers and dairy processing companies.

C2       Collective bargaining groups can only be formed by dairy farmers that have a “shared community interest”.  Dairy farmers will have a shared community interest for the purposes of this authorisation where they have a common interest in being long-term suppliers acceptable to the processor concerned and satisfy one of the following criteria:

(c)               the dairy farmers all have similar supply patterns and are all located within a distance in which milk can economically be delivered to that processor’s plant;

(d)              the dairy farmers supply a specialty raw milk product.

For the purposes of C2 there are two general categories of “supply patterns”:

·                   seasonal supply;  and

·                   all year round supply.

C3       Dairy farmers that satisfy one of the criteria in C2 can form cross-regional collective bargaining groups, however these groups must not comprise all of the dairy farmers that operate within any of the following regions: 

·                   Far north Queensland;

·                   Central Queensland;

·                   Southeast Queensland;

·                   Northern New South Wales;

·                   Central New South Wales;

·                   Southern New South Wales;

·                   Western Victoria;

·                   Eastern Victoria;

·                   Northern Victoria;

·                   South Australia;

·                   Western Australia;  and

·                   Tasmania.

C4       Dairy processing companies are free to choose whether or not to negotiate with collective bargaining groups of dairy farmers.  Dairy processing companies are free to negotiate with one, or some, of the dairy farmers within a particular group based on their own commercial requirements. 

C5       Dairy farmer participation in collective bargaining groups is voluntary.  Farmers retain the right to negotiate and enter into individual contracts with dairy processing companies.  Farmers can leave collective groups on giving reasonable notice.

C6       Collective bargaining groups of dairy farmers, individual farmers or farmer representatives may not prevent or restrict other farmers from supplying particular dairy processing companies.

C7       Each member of a collective bargaining group must not discuss its confidential negotiations with a particular dairy processing company with members of other collective bargaining groups, individual farmers outside the group or other farmer representatives.  Members of collective bargaining groups may not disclose information obtained in negotiations with dairy processing companies, that at least one party considers to be confidential, to members of other collective bargaining groups, individual farmers outside the group or other farmer representatives.  If a member of a collective bargaining group participates in another collective bargaining group, that member must not disclose information that at least one of the parties considers to be confidential and obtained as a result of participating in the former collective bargaining group to members of the latter collective bargaining group.

C8       All collective bargaining groups must notify ADFF of the names and locations of the farms comprising that group, including the shared community of interest criteria that the group satisfies.  ADFF must be notified of any changes to the composition of collective bargaining groups.

C9       ADFF must maintain a register of collective bargaining groups including the names and locations of all farms comprising each group.  This register is to be kept up to date.

C10     ADFF must allow any dairy processor and the Commission, upon their request, access to the register free of charge during normal business hours.

C11     Parties to the authorised arrangements must provide the Commission with any contract that is entered into under these arrangements upon the Commission’s request.

C12     Dispute Resolution

12.1     Processors and Collective Bargaining Groups (CBGs) will cooperate to ensure that any disputes in relation to the formation of CBGs or the negotiation of contracts between processors and CBGs are resolved promptly and efficiently by mutual negotiation.  Where a dispute arises, the party complaining (Complainant) will prepare a written complaint (the Complaint) setting out:

(d)               the nature of the dispute;

(e)                what outcome the Complainant wants;  and

(f)                 what action the Complainant thinks will settle the dispute,

and will deliver the Complaint to the other party.

12.2     Reference to Mediator

On delivery of a Complaint, processors and CBGs must make all reasonable efforts to resolve the dispute.  Within eight weeks of receipt of a Complaint, the party receiving the Complaint must respond in writing to the Complainant.  If the dispute is not resolved within eight weeks, either party may refer the matter to a mediator.

            12.3     Mediator

                        In the event of a dispute between the parties being referred to a mediator, the mediator must be a suitably qualified independent person, experienced in the milk industry, agreed upon between the parties (or, in default of agreement, appointed by the person for the time being President of the relevant state Law Society or equivalent).

            12.4     Costs of Mediation

                        The parties shall be equally liable for the costs of the mediation and must pay their own costs of attending the mediation.

            12.5     Terms of Mediation

                        In relation to any mediation:

(c)          everything that occurs in the course of the mediation will be in confidence;  and

(d)         all discussions will be without prejudice.

12.6     Court proceedings

                        If no agreement can be reached by the parties by means of mediation under this clause within eight weeks of the dispute being referred to mediation (or such longer period as the parties agree), either party may refer the dispute to the courts.

4.         In this determination the terms “processor” and “dairy processing company” include any legal entity that acquires raw milk from dairy farmers for the purpose of supplying that milk to a dairy processing company for processing.

5.         The authorisation granted by this determination is effective until 1 July 2005.

6.         Pursuant to subs 88(6) of the Act, the authorisation of the collective bargaining arrangements has the effect as if it were also an authorisation in the same terms to every other person named or referred to in the application as a party to the contract, arrangements or understanding, i.e. all Australian dairy farmers.

7.         Pursuant to subs 88(10) of the Act, the authorisation of the collective bargaining arrangements applies to or in relation to farmers who become parties to the proposed arrangements at a time after the authorisation is granted. 

8.         Pursuant to subs 88(13) of the Act, the authorisation applies to any collective bargaining arrangements entered into by groups of dairy farmers across Australia in accordance with the conditions outlined in par 3 above. 

9.         The Tribunal notes that this authorisation does not compel any party to participate in collective bargaining.  Nor will it impact, unless the parties so choose, on arrangements that are currently in place between dairy processing companies (including cooperatives) and their dairy farmer suppliers. 

17                  We order accordingly. 

 

I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Decision of the Tribunal. 


Associate:        


Dated:              26 August 2002



Counsel for National Foods Limited:

Mr C Jose



Solicitor for National Foods Limited:

Freehills



Representative for Australian Dairy Foods Federation:

Mr J McQueen



Counsel for the ACCC:

Mr D Star



Solicitor for the ACCC:

Australian Government Solicitor



Date of Hearing:

16 August 2002



Date of Judgment:

16 August 2002