WHILE THE grape and wine supply chain waits for positive export figures to translate into a real business boost, initial reports of suggest the grape price per tonne is hovering between $370 and $400 throughout the inland regions (Murray Darling, Riverina and Riverland). This represents a slight jump up from last year’s average of about $320 a tonne; offering hope of a recovery to good returns for both grapegrowers and wineries. Daniel Whyntie reports.
Grapegrowers spend the vast majority of their annual expenses before vintage – in fact before the December 15 date which the Australian Wine Industry Code of Conduct sets out for price notifications. And some growers remain frustrated by a either a lack of information or the restrictive nature of their contract which has last years’ low price rolling across to 2017. There were even rumours of a ‘tractor blockade’ and grower boycotts before this year’s vintage began.
Last year the Australian Competition and Consumer Commission (ACCC) declared that contracting practices were the most significant issue affecting viticulture in a report into the sector.
“The risk sharing weighs strongly against the growers; they find it difficult to know what price they will receive and some are only paid after delivery. It’s not the equitable sharing of risk we’d like to see in good contracting practices,” said Mick Keogh, ACCC commissioner.
Independent Senator Nick Xenophon, leader of the Nick Xenophon Team political party, has been a vocal critic of industry’s price-setting regime and actively called on the ACCC to investigate.
“Unless we give medium to small business a chance to grow without fear of the big boys we won’t grow are economy. I’ll be pushing for access to justice, we need provisions that make it easier for people to prosecute abuses of market power,” said Xenophon.
Xenophon wants to see a mandatory code that covers the whole supply chain; along with a low cost, fast track method of dispute resolution to be made available.
“At the moment the viticulture code has less bite than a toothless Chihuahua, at least a Chihuahua, makes noise and jumps up and down. The rules need to be stronger or they are not effective,” said Xenophon.
“If a small producer has to go to court it costs millions. For a small company to blow two or three years profit on a court case they just can’t do it. We need access to justice through a fast track low cost dispute resolution. I want any changes to include a dispute settlement process with teeth.”
Xenophon said we will need time to see if the new unfair contract terms protections will address the issues; but that the recent Woolworths ‘Mind The Gap’ scandal shows how weak the current laws are, likening them to having a speed limit without a speed camera.
UNFAIR CONTRACT PROTECTIONS
In an aim to address imbalances in bargaining power a new law came into effect last year. From November 2016 the new ‘unfair contract terms’ law will protect growers and small businesses from unfair terms in standard form contracts where a small business has had limited or no opportunity to negotiate the terms of the arrangement.
“It will relate to small business and standard form contracts, if they fall into these categories it applies. A good comparison is a mobile phone contract where you don’t haggle over the details; if the terms are presented as take it or leave it then it applies,” Keogh said.
A contract term may be unfair if it causes significant imbalance, is not reasonably necessary to protect the legitimate interests of the party advantaged by the term, and would cause harm to the other party if it were relied on. For example, a term that enables a wholesale or retailer to unilaterally vary quality requirements after an agreement has been made may be an unfair term.
WHAT TO DO
If you think terms in a contract being offered are unfair make contact with the ACCC, a good first contact is with an industry body which may have a better understanding of the terms and how they relate specifically to viticulture.
“ACCC has a role in pursuing these cases and over the next 12 months it will be a focus for us. There will be a period of education over the next six months but further down the track we will be; looking to identify those not doing the right thing and prosecute those cases,” Keogh said.
The law applies to standard form contracts where at least one of the businesses involved employs less than 20 people, and the price payable under the contract is no more than $300,000 or $1 million if the contract is for more than 12 months.
A standard form contract is usually one that has been prepared by one party to the contract and where the other party has little or no opportunity to negotiate the terms – that is, it is offered on a ‘take it or leave it’ basis.
There is a presumption that a contract is a standard form contract, so the party that prepared the contract has to prove it isn’t (e.g. by demonstrating a real willingness to make requested changes to key terms).
“Once the ACCC is aware, it can choose to prosecute, or courts can strike the clause. So there is a strong incentive for companies to get it right or they risk prosecution; not by the grower but by the ACCC; and they would not be able to enforce their contract,” Keogh said.
The ACCC has analysed standard form contracts across a range of industries, and published its interpretation of the new law on its website for guidance.
“We have looked at terms and brought to certain companies’ attention, some undertook to alter their contracts but some haven’t. The ACCC has published its view, there will be some qualification as these things get worked through in court, but ultimately it is a strong guide,” Keogh said.
The new law will not address word of mouth contracts were nothing is in writing.
“We’ve seen a lot of cases where there is nothing in writing and there is no understanding of proper practices,” Keogh said.
Importantly, terms that set the upfront price payable under the contract are not covered by the law.
The protections apply to standard form contracts entered into or renewed on or after 12 November 2016, but will not apply to pre-existing contracts that were ‘assigned’ on or after 12 November 2016.