Industry focus: ACCC to crack down on non-compliant provisions within horticulture produce agreements

Red Rich Fruits, a fresh fruit trader based in New South Wales and Victoria, recently came under scrutiny of the Australian Competition and Consumer Commission (ACCC) over concerns regarding its standard agreements. Specifically, the ACCC noted that provisions within its horticulture produce agreement with growers were likely to constitute unfair contract terms under the Australian Consumer Law (ACL) and be in breach of the Horticulture Code of Conduct (Code), which is the mandatory code for the horticulture sector prescribed within Australia’s competition and consumer legislation.

The Red Rich Fruits agreement

The horticulture produce agreement used by Red Rich Fruits was a standard form contract prepared and distributed by a horticulture trader industry group to its members for use. Among the terms within the agreement was one term which allowed the trader to seek credit from a grower if the grower’s produce was on-sold to a third party and subsequently rejected by that third party.

In a media release on 25 June 2019, the ACCC noted its concern that such a term is likely unfair as it required growers to provide credit for the amount the third party had contracted to pay the trader for the rejected produce and that amount was likely to include the trader’s profit margin.

Similarly, the ACCC highlighted that further terms within the agreement relating to pricing and payment may also be in breach of the Code’s pricing formula and payment transparency terms.

Red Rich Fruits has agreed to amend its agreements in response to the ACCC’s concerns.

Implications

In light of the fact that the Red Rich Fruits agreement was supplied by a horticulture trade industry group, ACCC Deputy Chair Mick Keogh expressed concern that there may be more widespread non-compliance within the industry and that other traders may be using similar agreements in their dealings with growers.

Accordingly, the ACCC has announced that it is currently auditing horticulture produce agreements and will take enforcement action as necessary in order to ensure compliance within the industry. The regulatory body also urged traders and their representatives to review their horticulture produce agreements and ensure that they do not contain any unfair contract terms and are in compliance with the Code.

The Red Rich Fruits example demonstrates the ACCC’s willingness to investigate and clamp down on non-compliance by horticulture traders in relation to their agreements with growers.

Businesses who are ‘traders’ for the purposes of the Code (ie businesses that directly buy produce from a grower for resale purposes and businesses that sell produce on behalf of a grower for a commission or fee) must ensure that the terms within their agreements with growers are not unfair or in breach of the Code. In particular, traders should give careful attention to the pricing and payment terms within their agreements to ensure that they are sufficiently transparent and not significantly imbalanced against the growers’ rights and obligations.

How can we assist?

HWL Ebsworth’s Intellectual Property and Consumer Law teams have extensive experience in assisting businesses in the horticulture industry with their contractual arrangements to ensure that they comply with obligations under Australian competition and consumer law. If you are concerned over compliance issues in relation to your horticulture business, please contact us for further information on how we can assist you.

This article was written by Luke Dale, Partner, Dayne Johnson, Partner and Stephanie Leong, Law Graduate.