Australia's largest dairy producer Murray Goulburn and its former executives misled farmers by overstating its milk price forecast, the competition regulator claims.
In documents filed to the Federal Court on Friday, the Australian Competition and Consumer Commission alleges Murray Goulburn and its former managing director Gary Helou and former chief financial officer Bradley Hingle knowingly overstated the farm-gate milk price it would pay dairy farmers.
The farm-gate milk price is a weighted average price for milk over a financial year that Murray Goulburn pays to farmers in the dairy regions of Victoria, South Australia and southern NSW. In parts of these regions, Murray Goulburn is the only buyer of milk from the farmers.
According to the ACCC, Murray Goulburn chose not to downgrade its farm-gate milk price, despite a number of "adverse developments".
They included a drop in auction prices for dairy commodities such as bulk milk powder, butter and cheddar cheese in May and June 2015 and Murray Goulburn's experts forecasting lower commodity prices for the 2016 financial year.
Mr Helou resigned in April last year after the dairy co-operative slashed its profit forecast by as much as 40 per cent and cut the price it paid farmers for their milk from $5.60 a kilogram of milk solids to $4.75 to $5 a kilogram.
Murray Goulburn is also facing a shareholder class action run by Slater and Gordon in relation to its 2016 financial year profit forecast.
Farmers 'vulnerable'
It is the ACCC's case that farmers relied on Murray Goulburn's farm-gate milk price to make significant business decisions and Murray Goulburn and its executives were aware many farmers were unable to switch milk processors easily.
"Many farmers are in a relatively vulnerable trading position, and rely on transparent pricing information in order to budget effectively and make informed business decisions," ACCC chairman Rod Sims said. "In these circumstances, farmers were entitled to expect Murray Goulburn to have a reasonable basis for determining its pricing, and to regularly update farmers if there was any change in forecast prices."
ACCC is seeking a declaration that Murray Goulburn knowingly overstated forecasts and a three-year education and training program. ACCC will not be seeking pecuniary penalty against Murray Goulburn because, as a co-operative, any penalty imposed can directly hit the farmers.
ACCC is also seeking seven-year disqualification orders and pecuniary penalties against Mr Helou and Mr Hingle.
ACCC said it would not take any further action against Fonterra Australia in relation to the step down of its farm-gate milk price, announced one week after Murray Goulburn revised its final farm-gate milk price in April 2016.
Mr Sims said Fonterra was more transparent about the risks and potential for a reduction in the farm-gate milk price from quite early in the season.
