Coles to pay $5.25 million over allegedly not passing on 10 cent milk price hike to farmers

The supermarket giant will pay millions to farmers after the consumer watchdog alleged an “egregious breach” of law.

James Hall

DECEMBER 5, 2019

news.com.au

The Australian retail industry is in crisis with a number of major Aussie brands closing so far in 2019.

Coles has agreed to pay a dairy co-operative $5.25 million after an investigation from the consumer watchdog alleged the major supermarket failed to pass on the 10 cent price hike as promised in marketing material earlier this year.

The leading Australian grocery retailers all lifted the price of milk after backlash from the community over the diminishing returns to farmers, but the Australian Competition and Consumer Commission (ACCC) says only a portion of the funds from Coles’ own-brand milk was passed on to farmers.

Of the 10 cents promised to be handed over to Norco Co-operative, according to the ACCC, Coles paid 3 cents and has now committed to pay an additional 7 cents per litre for two-litre and three-litre branded fresh milk.

“We were fully prepared to take Coles to court over what we believe was an egregious breach of the Australian Consumer Law,” ACCC chair Rod Sims said. “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.”

Mr Sims said the marketing of the hike led farmers, consumers and the general public to believe the full 10 cents was passed on directly to the industry, but when a 6.5 cents per litre price increase began on April 1, Coles reduced its payments to Norco under the 10 cents per litre retail price hike.

“We are pleased that Norco farmers will now receive additional money, commencing within seven days,” the watchdog boss said.

“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.”

In a statement provided to news.com.au, Coles said it disagreed with the ACCC’s interpretation of the issue but would pay Norco “to avoid an unnecessary dispute and provide immediate much-needed support” as farmers deal with drought and bushfires.

The supermarket giant had agreed with Norco to lift the price of milk by 6.5 cents in the days leading up to the 10 cent price hike. It says the purpose of the lift was never misleading and the extra funds was intended for the farmers.

As part of the $5.25 million, Coles said it would pay a lump-sum of $2.8 million to Norco out of good will and make up the gap to ensure the 10 cent price rise is passed on to the industry.

“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,” the company spokesperson said.

Norco chief executive Michael Hampson denied there was a dispute about Coles passing on the price hike to the co-operative and said his company had been providing farmers with the extra 10 cents a litre since the rise came into effect.

He told news.com.au the confusion related to what was passed on to the industry was a matter for Coles and the ACCC.

“This is a great outcome for our farmers. They’ll be receiving $2.8 million as a lump-sum payment and ongoing price increase of 7 cents a litre on the Coles-branded product, which we will be able to provide to our farmers,” he said.

“It will make a meaningful difference in this critical time of need as they battle probably the worst drought that we’ve seen.”