The competition regulator revealed on Thursday (5 December) that Coles will pay an additional $5.25 million to Norco Co-operative for distribution to its farmer members, following an investigation into public statements Coles had made about supporting Australian dairy farmers.
According to its website, Norco was established in 1895 and remains a fully Australian-owned co-operative of 326 members, representing 214 dairy farms across northern NSW and South-East Queensland. It states turnover of $590.7 million in 2018, on the sale of 219.9 million litres of milk.
The ACCC had been investigating allegations that Coles had represented in-store, on social media and in a media release that the full benefit of a 10 cents per litre rise in the cost of two-litre and three-litre containers of Coles-branded milk on 19 March 2019 would be passed directly to farmers.
However, the ACCC alleged that Coles had passed on just 3.5 cents per litre of this increase, and combined it with an unrelated 6.5 cents per litre rise.
ACCC chair Rod Sims accused the supermarket giant of “an egregious breach” of consumer rules, noting that it had been “fully prepared” to take legal action.
“Coles allowed farmers, consumers and the Australian public to believe that its 10 cpl price rise would go straight into the pockets of dairy farmers, when the ACCC alleges this was not the case for Norco farmers,” he said.
“We believe we had a strong case to allege misleading conduct by Coles.”
But Coles has since agreed to pass on the full 10 cents per litre to Norco for milk its members have and will supply between 1 April 2019 and 30 June 2020, amounting to roughly $5.25 million in total.
“Coles will pass the extra 10c per litre to processors who will distribute all of the money to the farmers who supply them with milk for Coles brand,” the ACCC quoted Coles’ written commitment as stating.
The pledge by Coles means the ACCC will drop its investigation.
“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,” Mr Sims said.
“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.”
He added: “We are pleased that Norco farmers will now receive additional money, commencing within seven days.
“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.”
Coles disputes any wrongdoing
The retailer has disputed the ACCC’s assertions that it misled customers and breached Australian Consumer Law in the process.
“Coles respects the regulatory process but disagreed with the ACCC’s interpretation of these issues,” it said in a written response to the regulator’s announcement.
“The ACCC raised issues with Coles in relation to the interaction between the March price increase and Coles’ existing commercial arrangements with Norco. The ACCC did not raise issues in relation to any other processor.”
Instead, the supermarket group repeated its stance of having “been providing additional support to dairy farmers across Australia since March through a 10c per litre price rise on 2L and 3L Coles brand milk”, and that the additional money is to clear any misunderstanding around the issue.
“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 1 April this year and at least the end of June 2020,” it said.
“This is on top of the 10c per litre on 2L and 3L Coles brand milk that Coles has been paying since March.”
In addition to the future higher prices paid for milk, Coles said that it “will pay farmer-owned dairy co-operative Norco a $2.8 million lump sum to be distributed to farmers”.
Norco has also been approached for comment.