Fertiliser Suppliers to Remove Unfair Terms in Contracts After ACCC Probe

A worker fills a hopper with fertilizer in Kyeemagh Market Gardens in Sydney, Australia. Mark Kolbe/Getty Images

Fertiliser suppliers have agreed to remove unfair terms in their contracts that disadvantage farmers or else face pecuniary penalties following the Australian Competition and Consumer Commission’s investigation of complaints.

“We initiated an investigation after receiving complaints that fertiliser suppliers were using contracts in a way that could disadvantage farmers,” ACCC Deputy Chair Mick Keogh said on Monday.

Suppliers were allowed to unilaterally change the quantity to be delivered or to cancel the deal if the supplier thought it is incapable to supply the goods, while buyers were restricted from raising defect issues on the goods are some of the potentially unfair terms the ACCC identified in standard form contracts it obtained.

Australia is set to implement changes to the laws on unfair contract terms, effective Nov. 10, 2023. Under the legislation, companies that will not comply with the amendment may face a maximum penalty of $50 million or three times the value of the benefit derived, whichever is higher, or if the value cannot be determined, 30 percent of the company’s turnover during the period it engaged in the activity.

The new law also increases the maximum penalty for an individual from $500,000 to $2.5 million.

“This is an important reminder to all businesses in the agricultural sector of the need to review their standard form small business contracts and remove unfair contract terms now, or they risk significant penalties when the new laws take effect,” Mr. Keogh said.

“We will continue to monitor traders in the fertiliser industry and, more broadly, across the agricultural sector, and we will investigate if we have concerns with contract terms.”

The ACCC, however, declined to disclose the list of the fertiliser suppliers that participated in the investigation and agreed with the amendment.

Unfair Contract Terms Laws Expansion

The Treasury Laws Amendment (More Competition, Better Prices) Bill, which proposed new penalties and expansion of the unfair contract terms laws amending the Competition and Consumer Act 2010 and the Australian Securities and Investments Commission Act 2001, passed the Parliament on Oct. 27, 2022.

“The increase in penalties should serve as a strong deterrent message to companies that they must comply with their obligations to compete and not mislead or act unconscionably towards consumers,” ACCC Chair Gina Cass-Gottlieb said last year.

“Standard form contracts provide a cost-effective way for many businesses to contract with significant volumes of customers. However, by definition, these contracts are largely imposed on a ’take it or leave it' basis. The unfair contract terms laws are vital to protect consumers and small businesses against terms in these contracts that take advantage of this imbalance in bargaining power.”

Prior to the amendments taking place, the maximum penalty was $10 million, three times the benefit or 10 percent of relevant turnover.

The changes will also apply to contracts of small businesses employing fewer than 100 persons or those which have an annual turnover of less than $10 million, regardless of the value of the contract.

Fertiliser Demand increases

In May, Rabobank said that fertiliser demand in Australia has grown in recent years despite the increase in prices brought by the COVID-19 pandemic and the Russia-Ukraine war.

Rabobank attributed the higher demand to good seasonal conditions and a surge in grain and oilseed production, driven by La Nina and investments in crop management.

“Although the conditions for the 2023 crop seasons are a bit different, they do not signal a reversal in the trend of historically-high cropping area and a significant application rate,” Rabobank analyst Vitor Pistoia said.