The Australian Competition and Consumer Commission has stopped short of a mandatory code in its final report on the wine grape market.
On 24 September 2019, the Australian Competition and Consumer Commission (ACCC) published the final report of its wine grape market study (Final Report). The Final Report is the latest market study by the ACCC in its broader review into competition and unfair trading issues in agricultural supply chains.
The Final Report considers the efficacy of the Australian Wine Industry Code of Conduct (Code), which is a voluntary industry code established in 2008 that sets out minimum standards for wine grape purchase agreements and provides dispute resolution mechanisms for disputes relating to price and quality assessment. Of Australia’s approximately 2500 winemakers, 43 have signed up to the Code, including six of Australia’s 20 largest winemakers.
The ACCC makes various recommendations that seek to address the power imbalance between winemakers and growers including the following:
- industry and peak bodies to develop a national grape quality and sampling standards to increase transparency and certainty over how grapes are priced;
- Wine Australia to publish pricing information for grapes purchased from warm climate regions;
- establish a best practice standard of payment within 30 days of the final grape delivery for all winemakers in Australia with a total processing capacity of over 10,000 tonnes (including subsidiaries);
- increase signatories to the Code; and
- winemakers to review standard form contracts for any unfair contract terms.
In addition to recommendations to amend and strengthen the Code, the ACCC also identified a range of terms in the wine industry’s standard form contracts with small businesses which may be unfair under the Australian Consumer Law. As unfair contract terms can be declared unenforceable and void, the Government is currently considering the introduction of civil penalties of up to $10 million for breaches of the unfair contract regime.
The ACCC continues to investigate contracts in the
agricultural industry under the unfair contract regime and has recently brought
successful proceedings against the Mitolo Group.
Despite identifying critical issues faced by grape producers, ACCC has not recommended that a mandatory code be introduced which leaves grape producers locked in standard form contracts with little to no bargaining power. The ACCC will monitor the progress of the industry in adopting the final recommendations for the next 12 to 18 months and may recommend a mandatory code if:
- more winemakers do not sign up to the Code; and
- the upcoming Code review does not address matters raised in this report regarding quality assessments, pricing, payment terms, and dispute resolution.
Authors: Andrew Gill (Partner) and Stephanie Kim (Lawyer) at MinterEllison