SOME of the country's largest chicken meat processors have agreed to make changes to current contracts with growers in the wake of the competition watchdog calling out unfair terms.
Growers say it's a step in the right direction but a mandatory code of conduct is what they are ultimately seeking.
The Australian Competition and Consumer Commission's investigation identified potentially unfair contract terms such as allowing processors to vary growers' supply arrangements or impose additional costs on growers, requiring growers to make significant capital investments and imbalanced termination clauses.
The ACCC said the changes several processors had now agreed to make would provide some additional certainty and transparency for growers, including clarifying the circumstances in which a processor may require growers to upgrade their farm facilities and when processors can make changes to grower manuals.
Additional changes have been agreed to provide clarity about the circumstances in which processors can impose additional costs on growers, and to balance notice periods for termination clauses.
Growers have applauded the ACCC's work but said the nuts and bolts of the changes that processors will make to contracts were yet to be seen.
Chicken Meat president with the Victorian Farmers' Federation Colin Peel said he hoped the outcome of the ACCC's crackdown would be fairer outcomes for chicken meat growers.
"Greater contract term transparency between processors and growers is critical to foster a fair deal for all and we see this as a positive step forward for the chicken meat industry," he said.
The VFF, together with the National Farmers' Federation, would continue calling for a code of conduct for the industry, he said.
"Our industry needs a code of conduct for all participants to help ensure growers receive a fair go in comparison to processors and the big supermarket chains," he said.
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Unique situation
The ACCC investigation honed in on unfair contract terms initially identified in its Perishable Agriculture Goods Inquiry.
Growers had been frustrated by the slow nature in which the wheels were turning in the aftermath of that inquiry.
The Australian Chicken Growers' Council has expressed serious concerns about the strategic directions that Australia's major chicken processors had taken over the past few years.
Executive officer Michael Moore said chicken was unique because farmers do not at any stage own the livestock, which belong to the processor companies. The grower provides farms and accepts a fee from the processor for husbandry of the birds from one day of age until they reach market weight.
In its submission to the inquiry, the ACGC said a number of processors had either gone out of business or been acquired, with the result being the supermarket duopoly being effectively repeated at a processor level in the chicken meat sector.
Ingham Enterprises and Baiada Poultry are now responsible for around 70 per cent of Australia's chicken.
This had resulted in a great deal of market power being placed in two sets of hands, according to ACGC.
Progress
Among other things, the perishable goods inquiry examined the ability of current laws and regulations to address the harmful effects of bargaining power imbalances.
ACCC deputy chair Mick Keogh said the thresholds and the lack of penalties in the current unfair contract term laws created challenges for investigations involving agricultural contracts.
He said the proposed changes to these laws tabled during the last federal parliamentary sitting would, if enacted, better protect Australian small businesses against unfair contract terms, and would enable the ACCC to seek pecuniary penalties for breaches.
"We expect all chicken meat processors to continue working with growers and grower groups until the contracts they have in place are clear and balanced," he said.
"We'll be monitoring the industry to see that it happens and will re-examine these and other contracts if unfair contract term laws are reformed."
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