New Mandatory Horticulture Code of Conduct: Our Critical Review
by Joe Lederman and John Gao © February 2007
BALDWINS – FoodLegal
Australian Food Lawyers & Consultants
A long-awaited new mandatory Code of Conduct was introduced for the horticulture industry in December 2006. We provide our analysis and review of the new Code in this 3,000 word article.
On 13 December 2006, the new mandatory Horticulture Code of Conduct (‘the new Code’) was passed. The Code was introduced by the Trade Practices (Horticulture Code of Conduct) Regulations 2006 (Cth) and will come into effect on 14 May 2007.
The new Code replaces the old voluntary “Produce and Grocery Industry Code of Conduct” for certain transactions involving horticultural products.
This article provides an analysis of the new Code, outlines the changes introduced and considers what are the issues that have not been addressed. We also set out the issues that both the grower and the buyer should look out for when entering into arrangements under the new Code.
History of the Code
On 13 February 2000, in response to a Report of the Joint Select Committee on the Retailing Sector - Fair Market or Market Failure - (Baird Report), the Retail Grocery Industry Code of Conduct Committee (RGICCC) was appointed by the Federal Government to address issues including an ombudsman scheme to help resolve disputes between parties in all vertical relationships in the grocery industry. It was also intended to improve transparency in “vulnerable” supply markets, to raise product and labelling standards, and to reduce contractual uncertainty. The RGICCC introduced the voluntary Retail Grocery Industry Code of Conduct (“the old Code”). A copy of this earlier Code of Conduct is still available at the Federal Department of Industry, Tourism and Resources website.
On 11 February 2005, the RGICCC was renamed to become the Produce and Grocery Industry Code Administration Committee (PGICAC). The Retail Grocery Industry Code of Conduct was also renamed to the “Product and Grocery Industry Code of Conduct”. Apart from being a simple name change, there were no significant changes to the old Code despite a review of the Retail Grocery Industry Code of Conduct by the National Farmers’ Federation in September 2003 which recommended major changes.
At the 2004 Federal election, the government promised to introduce a mandatory Code of Conduct for the horticulture industry. Debate about contents of the new Code began in July 2005 and drew immediate criticism from farm groups and horticulture industry groups (See, for example, Draft horticulture code worries PGA and NFF joins fight against horticulture code of conduct). After almost 18 months of debate, the final draft of the Code was welcomed by the National Farmers’ Federation.
The new Code was tabled in Federal Parliament in September 2006 and was passed in December 2006. A copy of the new Code is available here. However, it is worth noting that while the September 2003 review of the old Code by the National Farmers’ Federation was taken into account, many of the recommendations, as will be mentioned below, were not implemented.
What legal effect does the new Code have?
As mentioned earlier, the new Code is a mandatory Code of Conduct. It was introduced as a piece of Commonwealth regulation given legislative effect under section 51AE of the Trade Practices Act 1974 (Cth) as a prescribed mandatory industry code.
Because it is a mandatory code under the Trade Practices Act 1974 (Cth), the Australian Competition and Consumer Commission (‘the ACCC’) has the power to enforce the new Code. The ACCC is given the power under the Trade Practices Act 1974 (Cth) to apply, on behalf of a person who suffers loss, for court orders and injunctions which may result in fines and damages for those found to be in breach of the new Code.
Who does the new Code apply to?
Although there is an overlap in the application of the new Code and the old Code, the new Code does not in fact replace the old Code completely. There are two main gaps in the application of the new Code.
First, while the old Code applied to transactions involving a wide range of grocery and produce, including “animals under cultivation” (whatever that was intended to mean!), “marine life” and “non-food (eg flowers)”, the new Code is limited to fruits, vegetables (including mushrooms and other edible fungi), nuts, herbs and other edible plants. This means that the old voluntary Code continues to apply to those transactions which involve grocery and produce outside the scope of the new mandatory Code.
Secondly, the old Code applied to “industry participants in their vertical relationships with one another” where “industry” is defined as “those businesses involved in the production, preparation and sale of food, beverages and non-food grocery items, including (but not limited to) primary producers, manufacturers, and/or processors, wholesalers, importers and/or distributors, brokers and/or agents and grocery retailers”.
The new Code, however, only regulates “trade in horticulture produce between growers and traders” where “trader” is defined as an “agent” or “merchant”.
An “agent” means:
“A person who sells horticulture produce on behalf of a grower to a person for a commission or fee.”
by Joe Lederman and John Gao © February 2007