The Australian Competition and Consumer Commission (‘ACCC’) finalised its “Wine Grape Market Study; Interim Report” this month, having received a number of complaints in recent years regarding contractual arrangements between growers and winemakers in the various regions around Australia.
In its report, the ACCC found that the wine grape industry is “characterized by imbalances in bargaining power between major buyers (winemakers) and growers.” It also added that the industry is incredibly complex because it is so exposed to export markets, where market conditions and prices which change from year to year.
The well-publicized under-supply of grapes in the Barossa region this year brings home the issues identified in the ACCC’s Interim Report.
The ACCC noted that there were a range of “concerning practices” that resulted from the incredibly mismatched bargaining powers in the grower-winemaker relationships. These included:
- growers being largely price takers and unable to effectively negotiate with winemakers;
- a lack of transparency and certainty over pricing and quality assessment procedures;
- multi-year supply agreements without price certainty or verifiable price benchmarks;
- delayed payment terms for growers, sometimes up to nine months after delivery of grapes; and
- a low level of competition between winemakers acquiring grapes in warm climate regions.
Despite finding many instances of the above, the ACCC acknowledge that enforcement using the competition and consumer laws in Australia may not be the best way to address what they believe as “systemic behaviours that undermine competition and efficiency” in the industry. They believe that these issues are better addressed by way of industry Code of Conduct, one that may already exist in the wine industry (but one that requires strengthening in order to become effective). In their report, the ACCC even suggests that the industry Code of Conduct may need to become mandatory if practices do not change.
Among the many concerning practices highlighted by the ACCC, most concern was expressed with the contracting practices between growers and winemakers. In their study, they were able to identify a range of contract terms which they would consider “could be” unfair under the Australian Consumer Law (ACL). They urged growers to consider approaching the ACCC if they find their contracts contain unfair clauses, and ask that winemakers to review their grower supply agreements in this regard, particularly new agreements or those that are up for renewal.
If you wish to discuss any matters relating to this report, or seek a review of your contractual agreements for potential unfair clauses, please do not hesitate to contact me.