Mitolo Group is the largest potato wholesaler in Australia, according to the ACCC, and is a major supplier to the nation’s supermarkets.
The South Australia-based group — which, according to its website, has over 35 years of experience in growing, harvesting and packing potatoes and onions and has added olive oil and wine to its product base — stand accused of using standard form contracts that breach unfair contract provisions as well as the Horticulture Code.
“This is the first court action the ACCC has taken under the newly introduced Horticulture Code and our first unfair contract terms action in the agriculture industry,” said ACCC deputy chair Mick Keogh in announcing the legal action.
“The issues in this case go to the heart of concerns about unfairness in the agriculture sector that led to the establishment of the ACCC’s dedicated Agriculture Unit, which is investigating agricultural supply chains and engaging with the sector.”
According to the ACCC, Mitolo enters into exclusive supply agreements with farmers at the time of or even prior to planting, but does not agree on a price until potatoes are ready for harvest.
That, the competition watchdog said, effectively allows the group to “unilaterally determine or vary the price Mitolo pays farmers for potatoes, unilaterally vary other contractual terms, declare potatoes as “wastage” without a mechanism for proper review, and prevent farmers from selling potatoes to alternative purchasers”.
Even more concerning is the claim these contracts block farmers from selling their own property unless the buyer also enters an exclusive supply agreement with Mitolo.
“These are some of the most egregious terms we have seen in agricultural contracts, and are key examples of the contracting practices in the sector that we want to address,” Mr Keogh said.
“We believe that these terms have caused, or could cause, significant detriment to farmers, by passing a heavy burden of risk down to farmers, the most vulnerable player in the supply chain,” Mr Keogh said.
The ACCC is seeking to have these terms voided, incite penalties against Mitolo for breaching the Horticulture Code, and injunctions to stop it from trying to enforce or continue using these terms, as well as to recoup costs associated with the legal action.
Mitolo Group has been contacted for comment.
Raphael Brown of Clearscope Legal recently told My Business that all businesses should review their contracts, as well as standard terms and conditions, to ensure they are not enforcing or abiding by terms that breach legal standards.