Contracts investigated

By Country News

Australia’s competition watchdog has taken action against the country’s largest potato wholesaler, alleging the company’s exclusive supply contracts contain a number of ‘‘egregious’’ contract terms that pass significant risk on to farmers.

The Australian Competition and Consumer Commission has instituted proceedings against Mitolo Group Pty Ltd and a related entity, claiming the company has also breached the Horticulture Code in its dealings with farmers.

It is the first court action the ACCC has taken under the newly introduced Horticulture Code and the first unfair contract terms action in the agriculture industry.

‘‘The issues in this case go to the heart of concerns about unfairness in the agriculture sector,’’ ACCC deputy chair Mick Keogh said.

A major supplier to supermarkets, Mitolo enters into exclusive supply contracts with potato farmers for a specified volume of fresh potatoes each season.

The contracts are generally entered into before or at the time of planting, but Mitolo does not determine the price it will pay until the potatoes are ready for harvest.

The ACCC alleges terms that allow Mitolo to unilaterally determine or vary the price Mitolo pays farmers for potatoes, unilaterally vary other contractual terms, declare potatoes as ‘‘wastage’’ without a mechanism for proper review, and prevent farmers from selling potatoes to alternative purchasers are unfair.

Mitolo’s contracts also contain a term preventing farmers from selling their own property unless the prospective purchaser enters into an exclusive potato farming agreement with Mitolo, which the ACCC also alleges is an unfair contract term.

‘‘These are some of the most egregious terms we have seen in agricultural contracts ... we believe that these terms have caused, or could cause, significant detriment to farmers, by passing a heavy burden of risk down to farmers, the most vulnerable player in the supply chain,’’ Mr Keogh said.

The ACCC also alleges that Mitolo is trading with potato farmers under contracts that do not comply with the pricing requirements of the Horticulture Code by failing to specify in its contracts whether the price for the produce will be determined by a method or formula, before or upon delivery, and failing to agree with growers on the price to be paid (or a pricing formula) for produce, in writing, before or upon delivery.