Supermarket giant Coles has agreed to pay an extra $5.25m to one of its milk suppliers to settle a stoush with the consumer watchdog over whether it was passing all of a 10c a litre price increase on to dairy farmers.
The Australian Competition and Consumer Commission began investigating Coles following a promotional campaign in March in which the company promised it would “pass the extra 10c per litre to processors who will distribute all of the money to the farmers who supply them with milk for Coles brand”.
However, the ACCC alleges that although most farmers received the extra money, this was not the case with those who supplied milk to one processor, Norco.
Prior to its announcement, Coles had already agreed a separate price rise of 6.5c with Norco.
The supermarket group bumped the price rise up to 10c but the ACCC believes the 10c promised to farmers should have gone on top.
“Coles allowed farmers, consumers and the Australian public to believe that its 10c per litre price rise would go straight into the pockets of dairy farmers, when the ACCC alleges this was not the case for Norco farmers,” the ACCC chairman, Rod Sims, said.
Coles said that “in order to avoid an unnecessary dispute” with the ACCC it would pay Norco a $2.8m lump sum immediately plus an extra 7c a litre for two-litre and three-litre cartons of its home brand milk, beginning immediately and running through until 30 June next year.
The payments will be on top of the 10c price rise announced in March, the company said in a statement.
“Coles respects the regulatory process but disagreed with the ACCC’s interpretation of these issues,” it said.
“Coles is pleased to be able to provide additional support to Australian dairy farmers while we continue to work with industry and government stakeholders to find long-term solutions to ensure the sustainability of the Australian dairy sector.”
Sims said the ACCC had been “fully prepared” to take Coles to court over the allegations.
“We are pleased that Norco farmers will now receive additional money, commencing within seven days,” he said.
He said Coles had also agreed to an independent audit to make sure the extra money was passed on to farmers.”
“We take commitments made to us very seriously,” he said. “The ACCC will be keeping a very close eye on Coles to ensure they follow through on this commitment, and we are not ruling out future litigation if necessary.”