The ACCC has analysed the performance of the dairy industry and the structural and behavioural features which contribute to this performance.
The dominant picture that has emerged is one of significant imbalances in bargaining power at each level of the dairy supply chain. This begins with the relationships between retailers and dairy processors, and progresses down to the relationship between processors and farmers.
The ACCC has identified a range of market failures resulting from the strong bargaining power imbalance and information asymmetry in farmer-processor relationships. These features of the industry result in practices which ultimately cause inefficiencies in dairy production.
Neither the existing provisions of the Competition and Consumer Act 2010 (CCA), nor a voluntary code of conduct, sufficiently address these market failures. Therefore, the ACCC makes eight recommendations for improved transparency and allocation of risk in the commercial relationship between Australian dairy processors and farmers. Most significantly, the ACCC recommends that a mandatory code of conduct be introduced to address the market failures we have identified.