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Norco Co-operative Limited (Norco) dairy farmers will receive $5.25 million from Coles (ASX: COL) after the supermarket giant failed to pass on a 10c per litre price rise.
The payment to Norco follows an investigation by the Australian Competition and Consumer Commission (ACCC) into whether Coles fully passed on to Norco a 10c per litre prise rise.
The supermarket giant said in March this year that it would pass on the full benefit of a 10c per litre price rise to dairy producers of its Coles branded two litre and three litre milk.
The ACCC investigation focused on claims that when an unrelated 6.5c per litre increased commenced on 1 April, 2019, Coles reduced its payments to Norco under the 10c per litre price increase from 10c per litre to 3.5c per litre.
ACCC chair Rod Sims says this is a big win not just for Norco, but for consumers who believed they were supporting Australian dairy farmers.
"We were fully prepared to take Coles to court over what we believe was an egregious breach of the Australian Consumer Law," says Sims.
"We believe we had a strong case to allege misleading conduct by Coles."
"Accepting this commitment means that farmers will receive additional payments from Coles, with the majority of the money to be paid to Norco within seven days."
"Court action would also have taken many months if not years, with no guarantee that any money would have been paid to farmers as a result."
A sample of representations made by Coles on social media
Coles has committed in writing to the ACCC that it will pay an additional 7c per litre for two litre and three litre Coles branded fresh milk, which amounts to around $5.25 million to Norco for milk supplied between 1 April 2019 and 30 June 2020, resolving the ACCC's investigation.
"Coles allowed farmers, consumers and the Australian public to believe that its 10c per litre price rise would go straight into the pockets of dairy farmers, when the ACCC alleges this was not the case for Norco farmers," says Sims.
"We take commitments made to us very seriously. The ACCC will be keeping a very close eye on Coles to ensure they follow through on this commitment, and we are not ruling out future litigation if necessary."
The ACCC understands that Coles did pass on the 10c per litre retail price increase to other dairy processors.
A Coles spokesperson says the supermarket giant decided to pass on the lump sum in order to avoid "unnecessary" court time.
"Coles respects the regulatory process but disagreed with the ACCC's interpretation of these issues," says Coles.
"Instead, in order to avoid an unnecessary dispute and provide immediate much-needed support to Norco farmers dealing with the ongoing impact of drought and bushfires, Coles proposed the investment of an additional 7c per litre for 2L and 3L Coles Brand milk purchased from Norco between April 1 this year and at least the end of June 2020. This is on top of the 10c per litre on 2L and 3L Coles Brand milk that Coles has been paying since March.
"Coles is pleased to be able to provide additional support to Australian dairy farmers while we continue to work with industry and government stakeholders to find long-term solutions to ensure the sustainability of the Australian dairy sector."
Minister for Water Resources, Drought, Rural Finance, Natural Disaster and Emergency Management David Littleproud came out swinging in reaction to Coles' statement, calling on a consumer boycott at Coles until the matter can be resolved.
"Coles promised me when I negotiated the deal that all the money would go to farmers," says Minister Littleproud.
"They told their customers they were helping farmers, then tried keeping the money."
"Coles has shown its true colours and needs to put things right."
"Coles should now lead the way and put at least 20 cents a litre right across its dairy range, not just on milk to show they really do care about dairy farmers."
"They owe it to dairy farmers and the public for failing to live up to their promises and it will allow time for the government reforms such as the Dairy Code of Conduct to come into effect."
"Australians should show their support for dairy farmers by boycotting Coles until it comes good with this."
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