How to implement the ACCC’s recommended mandatory code of conduct

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How to implement the ACCC’s recommended mandatory code of conduct

A mandatory, enforceable code of conduct for the dairy industry which replaces the existing voluntary industry one, will bring rigour and greater accountability to the sector, the Australian Competition and Consumer Commission has found. If implemented, the benefits will be an independently created code that would apply to all processors who meet the standard and gives the ACCC the power to monitor, investigate and enforce the code.

The long-awaited ACCC final report, released on 30 April, outlined findings and recommendations to improve what it sees as ‘inefficiencies’ in dairy production, although many dairy farmers would use a different phrase. Eight recommendations were made but the key one was that a mandatory code of conduct be introduced to address the market failures. Plenty has been written about the recommendation of the mandatory code but little on how this will be done so we have taken a quick look at the process required. The key takeaway is that the path to an enforceable code is long with potential pitfalls along the way but the outcome is worth it for Australian dairy farmers.

Why a mandatory code?

During its inquiry, the ACCC found that its existing powers under the Competition and Consumer Act 2010 (NSW) were insufficient to address to the market failures in the dairy industry. Amongst other points, the ACCC found that the existing voluntary code (created on 1 July 2017) made by parties in the dairy industry was ineffective because:

– signatories are not legally obliged to comply;

– signatories can breach the code with little or no consequences;

– two major processors have not signed up; and

– monitoring compliance and determining breach of the code is difficult without an appropriate body to do so.

Also, under the Competition Act, the ACCC can create its own voluntary code (known as a prescribed voluntary code). The difference to an industry created voluntary code is that a prescribed voluntary code can be legally enforced against its signatories. However, the ACCC found that there would be little incentive, or external pressure, for a processor to sign up to such a code.

Alternatively, the ACCC said that the advantages of a mandatory code are:

-the most effective content would be created;

-it would have the best coverage;

-there would be strong enforcement options.

What is the difference between a code of conduct and a regulation?

In the case of a code of conduct under the Competition Act, they are essentially the same thing. The Competition Act allows for a regulation to be created which includes the code of conduct in a schedule to the regulation. An example of how this looks is the Competition and Consumer (Industry Codes – Horticulture) Regulations 2017: https://www.legislation.gov.au/Details/F2017L00302. We outline the steps below.

 

How is a mandatory code created and implemented

The creation of a mandatory code follows a 5 step process. These are:

  • the relevant minister, in this case the Minister for Agriculture and Water Resources (‘Minister’), consults with the Treasury Minister and then seeks Government approval to begin a public consultation process;
  • the Department of Agriculture and Water Resources (‘Department’) prepares a draft regulation impact statement on which the public and government agencies can comment;
  • if the public consultation and cost-benefit analysis supports the need for an industry code, the Minister can seek Government approval to proceed;
  • the Department then works with the Office of Parliamentary Counsel to create the code to ensure that it meets Commonwealth legislative standards. This is then released for public feedback and comment. As a result of the public feedback, changes may be made and then the Minister will seek the Treasury Minister’s agreement before finalising the code;
  • if the Treasury Minister provides agreement, the code will be submitted to the Federal Executive Council (made up of all Federal government ministers and the Governor-General) for approval. If approval is provided, the Governor-General will be asked to create the regulation enabling the mandatory code to have effect. Once this occurs, each House of Parliament (at the Federal level) has up to 15 sitting days to disallow the regulation.

What this means

As the steps show, a mandatory code of conduct will take some time to come into effect. However, the benefits of an independently created code that applies to processors which the ACCC can monitor, investigate and enforce is a positive outcome for dairy farmers. Furthermore, exemptions can be created so that smaller processers are not burdened with unnecessary regulation compared to their size. It would be heartening for dairy farmers to hear that processors such as Dairy Farmers Milk Co-operative ‘strongly support’ a mandatory code of conduct but there will no doubt be some who prefer the existing industry voluntary code for obvious reasons. However, a path forward has been provided by the ACCC and there is now the opportunity for dairy farmers to ensure that it occurs.

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