Issues Paper:
Review of the Horticulture Code of
Conduct
Mark Napper and Alan Wein
August 2015
Issues Paper: Review of the Horticulture Code of Conduct
© Commonwealth of Australia 2015
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Cataloguing data
Napper, M & Wein, A 2015, Issues Paper: Review of the Horticulture Code of Conduct, Department of Agriculture,
Canberra, August.
ISBN 978-1-76003-098-8
This publication is available at agriculture.gov.au/ag-farm-food/hort-policy/code-of-conduct.
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Issues Paper: Review of the Horticulture Code of Conduct
Foreword
The Australian Government has requested an independent review of the Horticulture Code to
look at the efficacy of the code, including the application, effectiveness and enforcement of the
code, in addition to options for the future of the code. This issues paper responds to the terms of
reference for the review and provides a summary of the current approach, previous inquiries
and some potential issues with the code to facilitate discussion on the code.
The Horticulture Code was established in 2007 to regulate trade in horticulture produce
between growers and traders of fresh fruit and vegetables and to provide an alternative dispute
resolution procedure. The Horticulture Code is a prescribed, mandatory industry code under the
Competition and Consumer Act 2010. The code came into operation with the aim of improving the
clarity and transparency in transactions between horticulture growers and traders and to
provide some standard procedures and mandatory requirements in the trading relationship. A
year after the code’s commencement, the Australian Competition and Consumer Commission
held an inquiry into the grocery sector, including the Horticulture Code. Due to the early stage of
implementation, its recommendations faced divergent views and the code was not amended.
We have been appointed by the Australian Government to undertake this review, owing to our
experience with industry codes and the horticulture industry. Our role is to provide an
independent perspective on the operation of the Horticulture Code. We are required to prepare
a report to the Minister for Agriculture, the Hon. Barnaby Joyce MP, within four months of the
commencement of the review. The report will include both findings and recommendations,
based on the terms of reference and evidence presented to us. The Department of Agriculture is
providing secretariat support throughout the review.
There are a number of issues that have already been brought to our attention, including: a
perceived lack of clarity, enforcement and supply chain transparency in the horticulture sector.
This issues paper intends to open a dialogue around known concerns, as well as canvassing
unknown issues, and potential solutions. It explores the code’s application, enforcement and
potential options for the future.
In our capacity as independent reviewers, we will be making recommendations about ways to
improve the current situation. These recommendations have the potential to affect thousands of
growers and traders, as well as other participants in the sector. We will be informed by careful
review of submissions, meetings with stakeholders, and our own research. The Australian
Government will then consider our findings and recommendations.
We invite you to contribute to the review by making a submission to this issues paper. We are
seeking your views and suggestions on the key issues affecting the Horticulture Code and the
appropriate approach to addressing these issues. It is essential to the success of the review that
we hear from the horticulture industry itself and other relevant stakeholders on their
experiences and views of the Horticulture Code. We encourage you to consider the terms of
reference and make a submission for our consideration.
Mark Napper and Alan Wein
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Issues Paper: Review of the Horticulture Code of Conduct
Contents
Foreword............................................................................................................................................................iii
1
Background ............................................................................................................................................... 1
The horticulture sector ..........................................................................................................................................1
What is the Horticulture Code? ...........................................................................................................................2
History of the Horticulture Code ........................................................................................................................3
Reviews and calls for amendments to the Horticulture Code ................................................................5
The broader regulatory and policy framework ...........................................................................................7
2
Application of the Horticulture Code ............................................................................................ 13
Coverage under the Code ................................................................................................................................... 13
Exclusions from the Horticulture Code ........................................................................................................ 13
Requirements under the Horticulture Code ............................................................................................... 14
Matters relating to trading relationships between agents and growers ........................................ 19
Matters relating to trading relationships between merchants and growers ................................ 21
Part 2 issues for consideration ........................................................................................................................ 22
3
Trading arrangements in the horticulture sector .................................................................... 23
The horticulture supply chain .......................................................................................................................... 23
The wholesale sector............................................................................................................................................ 23
Trading relationship arrangements ............................................................................................................... 24
Part 3 issues for consideration ........................................................................................................................ 26
4
Dispute resolution and enforcement under the Horticulture Code ................................... 27
Dispute resolution under the Horticulture Code ...................................................................................... 27
The role of Horticulture Produce Assessors and the Horticulture Mediation Adviser ............. 28
The role of the ACCC in enforcement of the Horticulture Code .......................................................... 31
Stakeholders’ views on dispute resolution under the Horticulture Code ...................................... 32
Consequences of a breach of the Horticulture Code ............................................................................... 33
Part 4 issues for consideration ........................................................................................................................ 35
5
Effectiveness of the Horticulture Code ......................................................................................... 36
Pre-code contracts ................................................................................................................................................ 36
The scope of the Horticulture Code................................................................................................................ 37
Clarity in the code .................................................................................................................................................. 38
Delivery and acceptance of horticulture produce .................................................................................... 38
An inability for growers to negotiate a trader’s terms of trade ......................................................... 38
Payment for horticulture produce.................................................................................................................. 39
Inappropriate behaviours .................................................................................................................................. 40
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Issues Paper: Review of the Horticulture Code of Conduct
The extent to which conduct prohibited by the Horticulture Code still occurs ........................... 40
Part 5 issues for consideration ........................................................................................................................ 40
6
Other matters......................................................................................................................................... 41
Good faith .................................................................................................................................................................. 41
International Perspectives ................................................................................................................................. 43
Education on the Horticulture Code .............................................................................................................. 43
Effect of technological changes on the Horticulture Code .................................................................... 44
Part 6 issues for consideration ........................................................................................................................ 45
7
Options for the future of the Horticulture Code ........................................................................ 46
Option 1: Let the Horticulture Code lapse ................................................................................................... 46
Option 2: Renew the current Horticulture Code....................................................................................... 46
Option 3: Renew the Horticulture Code with amendments ................................................................. 46
Part 7 issues for consideration ........................................................................................................................ 47
How to make a submission ........................................................................................................................ 48
Request for feedback and comments ............................................................................................................ 48
Confidentiality......................................................................................................................................................... 48
Intellectual property ............................................................................................................................................ 49
Privacy........................................................................................................................................................................ 49
Terms of reference ....................................................................................................................................... 50
Introduction ............................................................................................................................................................. 50
Terms of Reference ............................................................................................................................................... 50
The reviewers................................................................................................................................................. 51
Glossary ............................................................................................................................................................ 52
References ....................................................................................................................................................... 53
Attachment A
Summary of the Horticulture Code Committee views on 2008 ACCC
recommendations ......................................................................................................................................... 55
Attachment B
Summary of the Horticulture Taskforce’s views on 2008 ACCC
recommendations ......................................................................................................................................... 66
Attachment C
Comparison of the Food and Grocery Code and the Horticulture Code . 70
Attachment D
Summary of issues for consideration ................................................................. 72
Part 2 Application of the Horticulture Code ............................................................................................... 72
Part 3 Trading arrangement in the horticulture sector ......................................................................... 72
Part 4 Dispute resolution and enforcement under the Horticulture Code .................................... 73
Part 5 Effectiveness of the Horticulture Code ............................................................................................ 73
Part 6 Other matters ............................................................................................................................................. 74
Part 7 Options for the future of the Horticulture Code .......................................................................... 74
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Issues Paper: Review of the Horticulture Code of Conduct
1 Background
Australia’s horticulture industry is highly diverse, reflecting the variety of commodities and the
large geographical distribution of the industry. The industry faces a number of key challenges,
including:
 produce which can be highly perishable
 fluctuating supply and demand levels, which can significantly alter prices over a growing
season and result in inconsistencies in the treatment of high quality produce and volatility in
the returns for quality
 potentially long supply chains, in which growers and traders may be located thousands of
kilometres apart.
Long supply chains and a lack of accurate and timely pricing information was one of the driving
factors behind the development of the Horticulture Code in 2006 (CIE n.d.). At the time it was
generally smaller growers distant from the markets who reported the greatest dissatisfaction
with the way the horticulture market was operating.
The horticulture sector
Australia’s horticulture industry comprises fruit, vegetables, nuts, turf, nursery, herbs and other
edible plants. The industry is labour intensive and mostly seasonal. It comprises mainly smallscale family farms—however, there is a growing trend towards medium to larger scale
operations (Department of Agriculture 2015).
The horticulture industry is not a homogenous industry and business practices vary widely
across the sectors, and even within sectors. The diversity of the industry is reflected in the
number of different supply chain models used to get horticulture produce from the farm to the
consumer. See Part 3: Trading arrangements in the horticulture sector for more information.
Size of the industry
The horticultural industry is the nation’s third largest agricultural industry based on gross value
of production. The horticultural industry contributes significantly to the prosperity of people
living in rural and regional Australia. There were 56 700 people employed in Australia to grow
fruit, vegetables and nuts for the domestic and export markets in 2012–13, and the total gross
value of horticulture production was approximately $7.658 billion (Department of Agriculture
2014). There appears to have been minimal growth in the horticulture industry between the
code’s introduction in 2007 and 2012–13, based on ABS data on value of agricultural
commodities produced (ABS 2015, 2007).
The gross value of production of the 10 largest commodities in 2013–14 was:
 potatoes ($620 million)
 apples ($434 million)
 almonds ($346 million)
 bananas ($341 million)
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Issues Paper: Review of the Horticulture Code of Conduct
 tomatoes ($330 million)
 oranges ($328 million)
 mushrooms ($318 million)
 strawberries ($242 million)
 avocados ($216 million)
 melons ($187 million) (ABS 2015).
The wholesale fruit and vegetable industry is comprised of approximately 1600 traders
(IBISWorld 2015). The majority of these traders operate in the central wholesale markets. Due
to the high number of small to medium-size businesses, the wholesale industry displays a low
level of market share concentration. In 2013–14, total revenue for the wholesale fruit and
vegetable (excluding wine grapes) industry was $10.1 billion (IBISWorld 2015).
Growers of horticulture produce may also trade directly with parties outside of the wholesale
markets, including exporters, retailers, processors and restaurants.
Growing regions
The major horticulture growing regions in Australia include:
 the Goulburn Valley of Victoria
 the Murrumbidgee Irrigation Area of New South Wales
 the Sunraysia district of Victoria/New South Wales
 the Riverland region of South Australia
 northern Tasmania
 southwest Western Australia
 Far North Queensland, including Cairns, Mareeba and Atherton Tablelands
 Bundaberg/Gayndah and Bowen regions of Queensland
 the coastal strip of both northern New South Wales and Queensland including the Sunshine
Coast and Lockyer Valley west of Brisbane.
Additionally, there is a significant tropical horticultural industry in the Northern Territory and
around the large irrigation areas in the Ord River in Western Australia and the Burdekin River in
Queensland.
What is the Horticulture Code?
The Trade Practices (Horticulture Code of Conduct) Regulations 2006 (Horticulture Code) is a
prescribed, mandatory industry code under section 51AE of the Competition and Consumer Act
2010 (CCA). It regulates trade in horticulture produce between growers and traders of fresh fruit
and vegetables and establishes an alternative dispute resolution procedure. It aims to improve
clarity and transparency in trade between growers and traders of fresh fruit and vegetables. The
code was established in 2007.
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Issues Paper: Review of the Horticulture Code of Conduct
The Horticulture Code requires that growers and traders of horticultural produce have written
agreements in place when they trade with each other. It requires:
 traders to publish their preferred ‘terms of trade’
 growers and traders to use written agreements
 transactions to be either on an agent or merchant basis
 traders to provide written transaction information to growers.
The Horticulture Code does not regulate price and does not allow practices such as pooling and
price averaging and the payment of bonuses. The requirements of the Horticulture Code are
outlined in Part 2: Application of the Horticulture Code.
History of the Horticulture Code
In February 2000, as part of the Australian Government response to the Report of the Joint
Select Committee on the Retailing Sector, Fair Market or Market Failure?, the Retail Grocery
Industry Code of Conduct Committee (RGICCC) was appointed. The RGICCC subsequently
developed the voluntary Retail Grocery Industry Code of Conduct. In 2005, the code was
renamed to the Produce and Grocery Industry Code of Conduct (PGICC) to better reflect the
coverage of its scope within the industry. The PGICC is no longer in operation. Arguably, this
code has been replaced with the Food and Grocery Code.
The PGICC applied to vertical transactions between all participants, except consumers, in the
Australian produce and grocery industry supply chain that signed on to the code. Code
signatories included growers, processors, wholesalers, distributors and retailers. The PGICC was
a voluntary set of guidelines promoting fair trading practices in the produce and grocery
industry and provided a simple dispute resolution mechanism. Trading practices covered by the
PGICC were standards and specifications, contracts, product labelling, packaging and
preparation, and notification of acquisitions.
In a joint submission to the 2003 independent review of the PGICC by Mr Neill Buck, the then
Horticultural Australia Council and Horticulture Australia Limited noted that growers were
extremely dissatisfied with the PGICC and that it should be replaced by a mandatory code.
Amongst the issues raised in the submission was that a major area for disputes were between
growers and wholesalers, including whether wholesalers were acting as an agent or merchant,
growers’ rights to information and the timing at which ownership of/responsibility for produce
changes hands. Mr Buck recommended that the Australian Government implement a principles
based code underpinned by regulation with simple disclosure and business practice provisions
for those participating in the retail grocery industry supply chain (Buck 2003). In making this
recommendation, Mr Buck noted that a major question arises in the industry concerning the
relationship between grower and intermediary in sales to central markets (Buck 2003, p. 39).
That the PGICC did not require signatories to enter written contracts to evidence terms and
conditions of supply, and did not enable one party to require another to participate in the
mediation of a dispute, led to calls for a mandatory code.
On 1 October 2004, the Hon. John Anderson MP, announced that a re-elected Coalition
Government would introduce a mandatory horticulture code of conduct aimed at improving the
transparency of trading transactions in the wholesale fresh fruit and vegetable sector. In 2005,
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Issues Paper: Review of the Horticulture Code of Conduct
the Centre for International Economics (CIE) was engaged to undertake consultation and
develop a regulation impact statement (RIS) on options for a code.
Stakeholder consultations at that time found that growers and wholesalers agreed that the code
should apply broadly and provide a level playing field across all those in the industry who trade
with growers. However, supermarkets, independent retailers and others such as processors and
packing sheds said they were not part of the problem, already meeting the requirements of the
code under existing commercial arrangements. The RIS found that most complaints were made
about traders within the six central markets by those arguing serious problems existed, ‘where
written terms of trade are typically not provided, the transaction information is low and the
rights and responsibilities of growers and wholesalers is often unclear’, compared with ‘retailers
and processors (who also trade directly with growers) provide clear contractual terms and
provide a high degree of transparency’ (CIE n.d.).
In addition, the RIS identified that the ‘key problems in the horticulture wholesale sector are
information asymmetry and adverse selection of low cost, but also low clarity transactions’ (CIE
n.d.). The RIS noted that problems relating to lack of clarity and transparency impact on smaller
scale growers, growers who are a long way from the markets, growers who supply infrequently
to markets, or who are new entrants are most affected (CIE n.d.).
The recommended option was to provide clarity in trading arrangements and apply the code
across the wholesaling industry in a way that would have minimal market distortions and
provides flexibility for growers and wholesalers to agree on terms of trade. The preferred option
was to:
 apply the code to all wholesalers, including the central markets, off market wholesalers and
other intermediaries (transactions directly between growers and retailers, processors and
exporters would be excluded)
 improve the clarity of trading arrangements by stipulating that wholesalers trade as either
agents or as merchants
 require wholesalers to prepare and publish written terms of trade containing minimum
conditions on how they will trade with growers
 simplify minimum conditions in the terms of trade to key elements such as payment
timeframes, pricing and fees, transaction information to be provided, and some other
conditions
 allow all existing written contracts to be grandfathered under the code unless renewed,
extended, amended or transferred
 provide a framework for growers and wholesalers to enter long-term agreements for the
supply of produce
 ensure that wholesalers do not have to disclose the identity of their buyers, except for debt
recovery purposes in agent transactions
 apply a dispute resolution process (CIE n.d.).
The Australian Government considered the CIE RIS, other submissions on the Horticulture Code
and made a number of attempts to reach agreement between growers and traders before
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Issues Paper: Review of the Horticulture Code of Conduct
introducing the Horticulture Code. The code was made mandatory as it was clear to the
Australian Government that growers and traders could not agree on a voluntary code.
The Horticulture Code was signed by the Governor-General on 13 December 2006. A
disallowance motion was moved and debated in Parliament on 28 March 2007 (House of
Representatives 2007). The disallowance motion was on the basis that the Australian
Government had not delivered on its election commitment, as the code was not introduced
within 100 days and it did not include the large supermarket chains. This notion was disagreed
with by the then Minister for Agriculture, Fisheries and Forestry. The disallowance motion was
not successful and the Horticulture Code was introduced.
The Horticulture Code commenced operation on 14 May 2007. The key issues the proposed
mandatory code aimed to address were:
 a lack of clarity about when a wholesaler is trading as an agent or as a merchant when dealing
with growers
 a failure to invest in written documentation of trade, including written transaction
information and written trading agreements
 the need for an effective dispute resolution process, including independent assessment of
transactions and compulsory mediation.
Reviews and calls for amendments to the Horticulture Code
The Horticulture Code was reviewed as part of the 2008 Australian Competition and Consumer
Commission (ACCC) Grocery Pricing Inquiry, but has remained unchanged since its introduction.
There have been calls for the code to be amended, including a private member’s Bill in 2011.
2008 ACCC Inquiry into the Horticulture Code
On 22 January 2008, the government requested that the ACCC hold a public inquiry into the
competitiveness of retail prices for standard groceries, including assessing the effectiveness of
the Horticulture Code and whether the inclusion of other major buyers such as retailers would
improve the effectiveness of the code. The ACCC made 13 recommendations relating to the code:
1) Amend the Trades Practices Act 1974 to introduce civil pecuniary penalties and infringement
notices in relation to Part IVB provisions, such as the Horticulture Code and introduce
random record audits as an enforcement mechanism available under the code.
2) Amend the Horticulture Code to regulate first point of sale transactions of horticulture
produce between a grower and a retailer, exporter or processor.
3) Amend the Horticulture Code to regulate first point of sale transactions between a grower
and a trader in horticulture produce, including in relation to agreements made before
15 December 2006.
4) Amend the Horticulture Code to require a merchant to provide a grower, before delivery,
with either a price or a formula for calculating price. Any agreed method used to calculate
price must be by reference to the amount received by the merchant from the sale of the
produce to a third-party purchaser.
5) Amend the Horticulture Code to require that if a merchant does not reject the produce within
24 hours of physical delivery, the produce is deemed to be accepted.
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Issues Paper: Review of the Horticulture Code of Conduct
6) Amend the Horticulture Code to enable a merchant to deduct the cost of any services that are
required to prepare the produce for resale as part of the price amount or as part of the
method for calculating the price amount.
7) Amend the Horticulture Code to only permit an agent to recover their commission for
services performed under an agency agreement as a deduction from amounts paid by a thirdparty purchaser.
8) Amend the Horticulture Code to exclude persons who may be an agent’s competitor from
inspecting that agent’s records on a grower’s behalf.
9) Amend the Horticulture Code to ensure that transactions between a grower and a
cooperative/packing house, in which that grower has a significant interest, are exempt from
regulation under the Horticulture Code.
10)
Amend the Horticulture Code to permit agents and growers to engage in pooling and
price averaging.
11)
Amend the Horticulture Code to exempt transactions entered into in a grower shed at
the central markets from regulation under the code, while permitting parties to these
transactions to access the code’s dispute resolution procedure.
12)
The ACCC also recommends that the costs incurred by the parties to a dispute under the
Horticulture Code dispute resolution procedure be subsidised by the Australian Government
to the same extent as the voluntary PGICC.
13)
The ACCC also recommends the implementation of further education initiatives
regarding the Horticulture Code and its dispute resolution procedures, including the role of
assessors in resolving disputes.
In making its recommendations, the ACCC noted that the code had only been in place for a short
period of time, the code was designed to impose significant cultural and structural changes on
the horticultural industry, and that industry feedback should be obtained before implementing
the suggested changes (ACCC 2008, p. xxii).
Recommendation 1 relating to the ACCC enforcement powers was implemented in 2010 as part
of the franchising reforms and empowered the ACCC to conduct random record of audits, issue
public warning notices and provide for non party redress from 1 January 2011.
In October 2008, the Horticulture Code of Conduct Committee (the Committee), consisting of
growers, wholesalers, market operators, packers, retailers, processors and exporters, was asked
to consider the potential implications of implementing the recommendations and assist the
Australian Government in responding to the recommendations made in the ACCC report.
Following extensive consultation with industry representatives from all sectors, the Committee
gave qualified support for most, but not all, of the ACCC’s recommendations. The Committee’s
report, Implications of the Australian Competition and Consumer Commission recommendations to
amend the Horticulture Code of Conduct (August 2009) was publically released on 1 November
2009. Attachment A provides a summary of the Committee’s findings for each recommendation
from the report. The Committee also noted that there was little unanimity of views for many of
the recommendations. As the Chair of the Committee, Ms Christine Hawkins, noted in her report,
‘the divergence of views across and within industry sectors reflects the diversity of the industry
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Issues Paper: Review of the Horticulture Code of Conduct
itself. Although all sectors wish to see the Code improved, there are few Australian Competition
and Consumer Commission’s recommendations that are universally supported’.
In August 2011, the Horticulture Taskforce (the Taskforce), a collective peak horticulture
industry body, provided the Australian Government with its response to the ACCC
recommendations. The Taskforce consulted with grower peak bodies in the development of its
response. The Taskforce supported three of the ACCC recommendations, gave qualified support
for four others, but did not support the remainder. A summary table of the Taskforce’s views on
the recommendations is reproduced at Attachment B.
Competition and Consumer Amendment (Horticultural Code of Conduct) Bill
2011
On 19 September 2011, the Hon. Bob Katter MP introduced the Competition and Consumer
Amendment (Horticultural Code of Conduct) Bill 2011 (the Bill) into the House of
Representatives. The Bill sought to remake the Horticulture Code to:
 contain an alternative and broader definition of horticulture produce, define agents and
merchants differently and use the term ‘seller’ rather than ‘grower’
 direct parties to follow particular timeframes and utilise recognised trust accounts
 mandate certain procedures that must be followed as a minimum standard, such as the
‘intent to dispatch produce’ notification
 similarly provide that growers are entitled to receive information from agents and merchants
pertaining to prices, quantities, grades and dates of purchases
 not specify a range of specific information that must be contained in agreements made
between growers, agents and merchants
 contain similar provisions relating to dispute resolution, although there were procedural and
administrative differences
 apply to existing agreements.
On 22 September 2011, the Selection Committee referred the Bill to the House of
Representatives Standing Committee on Agriculture, Resources, Fisheries and Forestry
(Standing Committee) for inquiry and report. Submissions to the Standing Committee generally
supported the intent of the Bill, but refrained from advising that the Bill should be passed.
Concerns about the practical implementation and possible undesirable outcomes were raised.
The Taskforce offered support for the Bill, but this position was still ‘subject to some
clarifications and extra considerations’ (Horticulture Taskforce 2011, p. 5).
The Standing Committee recommended that the Bill not be passed, concluding that the Bill
‘would be unlikely to achieve its objectives and risks considerable unintended or undesired
consequences’ (House of Representatives: Standing Committee on Agriculture, Resources,
Fisheries and Forestry 2012, p. 30).
The broader regulatory and policy framework
Parties covered by the Horticulture Code operate in a broader regulatory and policy framework,
including those discussed in this section.
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Issues Paper: Review of the Horticulture Code of Conduct
Competition and Consumer Act 2010
The stated objective of the CCA is to enhance the welfare of Australians through the promotion
of competition and fair trading and provision of consumer protection (section 2). The CCA
operates as a single set of laws applying to most markets and businesses within Australia.
Schedule 2 of the CCA sets out the Australian Consumer Law (ACL), which applies to both
corporations and individuals carrying on a business within Australia.
The Horticulture Code is a prescribed, mandatory industry code under the CCA. The CCA states
that a person must not, in trade or commerce, contravene an applicable industry code (section
51AD). Therefore, a breach of the Horticulture Code is a breach of the CCA and the enforcement
of the Horticulture Code is through the enforcement provisions of the CCA. The ACCC enforces
the CCA.
Australian Consumer Law
The ACL is a single, national consumer law enforced and administered by the ACCC, each state
and territory’s consumer agency, and, in respect of financial services, the Australian Securities
and Investments Commission. Amongst its powers, the ACL prohibits misleading or deceptive
conduct and unconscionable conduct. Penalties for violating these provisions may include the
issuing of infringement notices by the ACCC, as well as pecuniary penalties being imposed by the
courts.
While the ACL does not relate specifically to the Horticulture Code, growers and traders of
horticulture produce must still comply with the general requirements set out in the ACL.
Misleading and deceptive conduct
Under section 18 of the ACL, a person must not, in trade or commerce, engage in conduct that is
misleading or deceptive or is likely to mislead or deceive. There is also a prohibition on making
certain kinds of false or misleading representations with respect to goods or services.
These protections apply to benefit both individuals and businesses and apply to businesses
regardless of whether they are operating under the Horticulture Code.
Unconscionable conduct
Under the ACL, businesses must not engage in unconscionable conduct when dealing with other
businesses or their customers. While unconscionable conduct is not defined under the ACL, it is
generally understood to be conduct which is so harsh that it goes against good conscience.
Australian courts have found transactions or dealings to be 'unconscionable' when they are
deliberate, involve serious misconduct or involve conduct which is clearly unfair and
unreasonable.
There are a number of factors a court will consider when assessing whether conduct is
unconscionable, these include:
 the relative bargaining strength of the parties
 whether any conditions were imposed on the weaker party that were not reasonably
necessary to protect the legitimate interests of the stronger party
 whether the weaker party could understand the documentation used
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Issues Paper: Review of the Horticulture Code of Conduct
 the use of undue influence, pressure or unfair tactics by the stronger party
 the requirements of applicable industry codes
 the willingness of the stronger party to negotiate
 the extent to which the parties acted in good faith.
Where a business is found to have acted unconscionably, there are a number of remedies
available under the CCA including injunctions, damages, compensatory orders, non-punitive
orders, adverse publicity orders, civil pecuniary penalties and disqualification orders.
Unconscionable conduct provisions cover the relationship between growers and traders, as well
as between growers and other businesses. For example, in 2014 Coles Supermarket settled two
separate proceedings commenced by the ACCC, admitting that it had engaged in ‘unconscionable
conduct’ in dealing with small food and grocery suppliers.
Unfair contract term protections
Part 2–3 of the ACL includes unfair contract term protections for consumers entering into
standard form contracts. This is also replicated in the Australian Securities and Investments
Commission Act 2001 to provide protections in financial product and service contracts. These
protections enable the courts to declare void a term within a standard form consumer contract
that is ‘unfair’. A term is ‘unfair’ if it causes a significant imbalance in the parties’ rights and
obligations under the contract, is not reasonably necessary to protect the legitimate interests of
the party advantaged by the term, and would cause detriment to a consumer if it were relied on.
Currently ‘unfair’ provisions in the ACL do not extend to business-to-business relationships.
The Australian Government has committed to extending the consumer unfair contract term
protections to small businesses as part of its Real Solutions Small Business Policy (Coalition
2013).
On 24 June 2015, the Treasury Legislation Amendments (Small Business and Unfair Contract
Terms) Bill 2015 (UCT Bill) was introduced into the House of Representatives to extend unfair
contract term protections to businesses with less than 20 employees agreeing to standard form
contracts valued at less than a prescribed threshold. The UCT Bill has been introduced and read
a first time, but is yet to be debated by the House.
A contract is a small business contract for the purposes of the protection against unfair contract
terms if, at the time it is entered into, at least one party to the contract is a business that employs
fewer than 20 persons, and the upfront price under the contract does not exceed either
$100,000, or $250,000 if its duration is more than 12 months (clause 8 of the UCT Bill).
A standard form contract is a contract prepared by one party, not negotiated between the
parties – and offered on a ‘take it or leave it’ basis. Section 27 of the CCA provides a number of
matters the court may take into account to this effect.
If passed by Parliament, this new law will protect small businesses, including small businesses
covered by the Horticulture Code, from unfair contract terms. If a court were to find a contract
term to be unfair under this law, it could make orders such as: declaring all or part of the
contract to be void; varying a contract or arrangement as the court sees fit; or directing the
respondent to repair or provide parts for a product provided under a contract at their expense.
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Issues Paper: Review of the Horticulture Code of Conduct
As the Bill is currently drafted, civil pecuniary penalties are not available in the event that a
court declares a term unfair and void.
An unfair term in a contract does not automatically mean the whole contract is void. The
remaining terms in a contract containing a void term will continue to operate unless they cannot
operate without the unfair term.
The protection from unfair contract terms does not however apply to terms of a contract that
sets out the main subject matter or the upfront price of the contract, or a term that is required or
expressly permitted by law (ACL, subsection 26(1)). This means that unfair contract protections
do not require a party to offer a ‘fair’ price for their goods or services.
It should be noted that the Bill contains a mechanism for the Commonwealth Minister to exempt
legislation and regulation that is deemed enforceable and equivalent to the new protections. In
determining this, the Minister must take into consideration a number of prescribed matters,
namely, the impact on small businesses, the impact on businesses generally and the public
interest.
Harper Review
On 31 March 2015 the Competition Policy Review Panel, led by Professor Ian Harper, released
its final report (the Harper Review) to the Australian Government. The review was an
independent ‘root and branch review’ of the competition framework in Australia. The terms of
reference for the review were broad, allowing the review panel to ‘inquire into and make
recommendations on appropriate reforms to improve the Australian economy and the welfare of
Australians, not limited to the legislation governing Australia’s competition policy, in regards to
achieving competitive and productive markets throughout the economy’.
The Harper Review provided 56 recommendations to the Australian Government for its
consideration. Although the panel did not make a specific recommendation about the
Horticulture Code, the panel did note in regards to codes of conduct that ‘Codes of conduct play
an important role under the CCA by providing a flexible regulatory framework to set norms of
behaviour. ... that generally apply to relationships between businesses within a particular
industry’ (Harper et al. 2015, p. 87).
The Australian Government is currently considering the recommendations of the review and is
expected to release a formal response in the last quarter of this year.
Agricultural Competitiveness White Paper
On 4 July 2015, the Prime Minister and Minister for Agriculture jointly released the Agricultural
Competitiveness White Paper - Stronger farmers, stronger economy. The paper sets out a number
of actions under five priority areas:
1) A fairer go for farm businesses
2) Building 21st century water, transport and communications infrastructure
3) Strengthening our approach to drought and risk management
4) A smarter approach to farming
5) Access to premium markets.
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Issues Paper: Review of the Horticulture Code of Conduct
Under the first initiative, a fairer go for farm businesses, the Australian Government states its
commitment to helping farmers achieve a better return at the farm gate by creating a more
competitive business environment, less regulation and lower, simpler and fairer taxes. Of
relevance to the horticulture sector, the Australian Government will invest ‘$11.4 million to
boost ACCC engagement with the agricultural sector including a new Commissioner expert in
agriculture’, as a ‘more farm-savvy and proactive ACCC will encourage fair-trading and
strengthen competition in agricultural supply chains’ (Australian Government 2015).
Food and Grocery Code of Conduct
On 2 March 2015 the Australian Government introduced the Competition and Consumer
(Industry Codes – Food and Grocery) Regulation 2015 (the Food and Grocery Code) to improve
standards of business conduct in the grocery sector (Food and Grocery Code Explanatory
Statement 2015, p. 1). The code arose out of an industry-led response to concerns about the
conduct of retailers towards their suppliers and ‘aims to regulate commercial relations between
retailers and wholesalers, on the one hand, and suppliers, on the other hand, to the extent that
they are not regulated by other codes’ (Food and Grocery Code Explanatory Statement 2015, pp.
1–2).
The Food and Grocery Code is a voluntary industry code prescribed under section 51AE of the
CCA. Once a retailer or wholesaler opts-in, the Food and Grocery Code is binding and, like the
Horticulture Code, a breach can be enforced by the ACCC.
Section 2 outlines the code’s four purposes as:
 regulate standards of business conduct in the grocery supply chain to build and sustain trust
and cooperation throughout that chain
 ensure transparency and certainty in commercial transactions in the grocery supply chain
and to minimise disputes arising from a lack of certainty in respect of the commercial terms
agreed between the parties
 provide an effective, fair and equitable dispute resolution process for raising and
investigating complaints and resolving disputes arising between retailers and suppliers
 promote and support good faith in commercial dealings between retailers and suppliers.
The Food and Grocery Code sets out certain standards of conduct that cover the life cycle of the
relationship between retailers and suppliers. This includes aspects such as product shelf
allocation and de-listing, fresh produce standards and quality specifications, as well as payments
for shrinkage, wastage and promotional activities. The Food and Grocery Code seeks to address
the potential imbalance in market power between retailers and suppliers with respect to the
allocation of risk. It also recognises suppliers’ need for certainty to plan appropriately for their
business, invest, innovate, and expand capacity or develop new product lines. Some of the
requirements have limited exceptions, and place the onus on the retailer or wholesaler of
proving that an exception applies in the circumstances.
The Food and Grocery Code requires that retailers or wholesalers and suppliers have written
grocery supply agreements. The Food and Grocery Code also prohibits retailers or wholesalers
from engaging in certain conduct (for example, they cannot unilaterally or retrospectively vary a
grocery supply agreement) unless certain exceptions apply. In most cases, these exceptions will
need to be provided for in the grocery supply agreement and in certain cases are subject to a
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Issues Paper: Review of the Horticulture Code of Conduct
reasonableness test. The retailer or wholesaler will bear the onus of proving that the exception
applies in circumstances where the supplier claims that the prohibited conduct has been
engaged in. The code includes an obligation for retailers and wholesalers to deal lawfully and in
good faith in their treatment of suppliers.
The Food and Grocery Code does not apply to the extent that it conflicts with the Horticulture
Code (Food and Grocery Code, subsection 4(4)(a)). A table summarising the differences between
the Horticulture Code and the Food and Grocery Code can be found at Attachment C.
Australian Small Business and Family Enterprise Ombudsman
The Australian Government is creating an Australian Small Business and Family Enterprise
Ombudsman (the Ombudsman). Legislation has been introduced into Parliament and is under
consideration by the Senate Legal and Constitutional Affairs Legislation Committee. The
Ombudsman will be a Commonwealth-wide advocate for small businesses and family
enterprises; contributor to the development of small business-friendly Commonwealth laws and
regulations; a concierge for dispute resolution and provide its own limited, outsourced,
mediation service.
One area where the Ombudsman will not undertake a formal role at this time is in relation to
dispute resolution under the mandatory industry codes for franchising, horticulture and oil. The
specific requirements under each code do not align with the operation of an ombudsman who is
an advocate. However, the Ombudsman will be able to receive such enquires regarding industry
codes matters, and, through its concierge role, refer businesses to the mediation or dispute
resolution adviser under each code.
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Issues Paper: Review of the Horticulture Code of Conduct
2 Application of the Horticulture Code
Coverage under the Code
The Horticulture Code covers trade between growers and traders in horticulture produce,
defined as unprocessed fruits, vegetables (including mushrooms and other edible fungi), nuts,
herbs, other edible plants, but not nursery products (regulation 3). Nursery products include:
 trees, shrubs, plants, seeds, bulbs, corns and tubers (other than edible tubers)
 propagating material and plant tissue cultures, grown for ornamental purposes or for
producing fruits, vegetables, nuts or cut flowers and foliage
 cut flowers and foliage.
Under the Horticulture Code, ‘trader’ is defined by regulation 3(6) as ‘an agent or a merchant’
where:
 ‘agent means a person who sells horticulture produce on behalf of a grower to a person for a
commission or fee’
 ‘merchant means a person who purchases horticulture produce from a grower for resale of
that horticulture produce, but does not include:
a) a person who purchases the produce for export by that person; or
b) a person who purchases the produce for retail sale by that person.’
The regulation also defines grower as a person who grows their own horticulture produce for
sale.
Exclusions from the Horticulture Code
The Horticulture Code does not apply to trade between growers and processors, growers and
exporters, or growers and retailers (subregulation 3(2)). The definition of horticulture produce
restricts the application of the code to unprocessed horticulture produce and the definition of
merchant excludes processors, exporters and retailers. This limited scope has been questioned
and recommendations have been made to extend it.1 The appropriateness of the scope of the
code is discussed further in Part 5: Effectiveness of the Horticulture Code.
Additionally, the Horticulture Code does not apply to written agreements entered into before
15 December 2006, unless these written agreements have been varied. A variation could mean
that a written agreement is amended, extended or transferred. The 2008 ACCC inquiry into the
grocery sector found that a significant number of growers and traders opted not to move from
See, for example, the 2008 ACCC Grocery Pricing Inquiry, which recommended the code be extended to
include all first point of sale transactions.
1
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Issues Paper: Review of the Horticulture Code of Conduct
written agreements existing before 15 December 2006 to agreements subject to the Horticulture
Code to avoid regulation by the Horticulture Code. Anecdotal evidence suggests that a significant
proportion of trade in the horticulture industry still occurs under such arrangements, limiting
the coverage of the Horticulture Code.
The Horticulture Code also does not apply to growers or traders operating under a statutory
potato marketing scheme (subregulation 3(2)). Currently the only statutory potato marketing
scheme is operated by the West Australian Potato Marketing Corporation. The West Australian
Government has committed to abolishing this scheme by 2017. Therefore, it is probable that this
exception will be unnecessary in the next iteration of the code.
Requirements under the Horticulture Code
The Horticulture Code outlines key requirements to cover the relationship between growers and
traders.
The key requirements of the Horticulture Code include that:
 traders publish and make publicly available terms of trade documents outlining their
preferred trading conditions, including terms for rejection of produce
 growers and traders have written agreements which specify a range of trading conditions,
including whether the trader will trade as an agent or a merchant
 traders provide written transaction information to growers
 growers and traders must participate in independent assessment of transactions and
mediation where there is a dispute under the code
 due care is exercised.
Terms of trade
The Horticulture Code requires that traders must prepare, publish and make publicly available
their terms of trade and the conditions on which the trader is prepared to trade in horticultural
produce with growers (subclause 4(1)). The trader must give a copy of his or her terms of trade
to the grower if asked (subclause 4(4)). If the trader changes these terms of trade, the trader
must prepare a document that sets out the updated terms of trade so that the changes are
incorporated into the terms of trade, and then publish and make these updated terms of trade
publically available (subclauses 4(1)-(3)).2
The Explanatory Statement to the Horticulture Code notes that it is intended that a trader will determine
how he or she wishes to make the terms of trade publically available. This could be satisfied by displaying
them at the trader’s business premises and/or on the trader’s website.
2
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Issues Paper: Review of the Horticulture Code of Conduct
The Horticulture Code requires that the trader’s terms of trade must specify a number of
matters including:
 if the trader is prepared to trade as an agent or a merchant or both (although the trader
cannot be both agent and merchant under the one horticulture produce agreement)
 any delivery requirements
 any quality requirements for produce delivered by growers to the trader
 any circumstances in which a trader may reject horticulture produce delivered by a grower,
including the period during which the trader must notify the grower the produce has been
rejected and the consequences of the rejection
 the period within which the trader will pay the grower
 in respect of any insurance for horticulture produce the trader may hold:
 if the trader has insurance for horticulture produce under the trader’s control
 if the trader has insurance, whether the insurance covers fire, theft and accidental damage
(other than deterioration of quality or any other inherent losses)
 if the trader has insurance, the name of the insurer and the maximum amount of claims
covered by the trader’s policy (subclause 5(2)).
Additionally, if a trader is an agent, the terms of trade must include details on any commissions
or fees the agent charges, and if the agent is prepared to pursue bad debts (subclause 5(3)).
Matters that are not inconsistent with the Horticulture Code may also be included in a trader’s
terms of trade if the trader considers they are appropriate to include (subclause 5(4)).
The Explanatory Statement released when the code was first introduced provides that the intent
of a trader’s terms of trade is to provide standard terms that can then be changed to meet
individual agreements with growers (for example, a trader’s terms of trade may state that a
grower will be paid within 30 days of sale, however an individual grower and trader may agree
to 14 days) (Horticulture Code Explanatory Statement 2006). The individual agreement between
a grower and a trader is enshrined in the horticulture produce agreement which establishes the
relationship between a grower and a trader (regulation 5).
When the Horticulture Code was introduced, template terms of trade documents were
developed and published to assist parties to comply with the code. For example, the ACCC
included a terms of trade template in their educational material and Fresh State, the Victorian
central market, also developed a template for their traders.
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Issues Paper: Review of the Horticulture Code of Conduct
Horticulture produce agreement
Growers and traders can only trade in horticulture produce with each other if they have entered
into a written horticulture produce agreement that complies with Part 3 of the Horticulture
Code (clause 6). If a term of a horticulture produce agreement is inconsistent with a term of the
Horticulture Code, the Horticulture Code prevails, and the inconsistent terms are not binding on
the parties (clause 10).
Although a trader may be prepared to trade as both an agent and a merchant, a trader cannot act
as both under the one horticulture produce agreement (clause 7). In addition to stating whether
the trader will act as an agent or a merchant, the horticulture produce agreement must specify:
 any delivery requirements
 any circumstances in which the trader may reject horticulture produce, including the period
within which the trader must notify the grower of the rejection and the consequences of the
rejection
 the trader’s insurer (if any) for horticulture produce covered by the agreement, the matters
covered by the insurance and the maximum amount of claims covered by the insurance
 the process for varying the agreement
 if the agreement is only for a limited time, the term of the agreement3
 any quality and quantity requirements relating to the horticulture produce
 how the trader deals with produce that does not meet specified quality and quantity
requirements
 contact details of the person the grower/trader should contact in the event of a dispute with
the other party under the agreement or the code
 the process for terminating the agreement (subclause 9(2)).
Agents must also specify in a horticulture produce agreement with a grower:
 the period within which the agent will pay to the grower the proceeds of a sale
 the reporting period for the agreement and the period during which a statement must be
given to the grower for the reporting period
 if payment by the grower of any commissions, fees and extra costs is contingent on the sale of
the horticulture produce or any other event
The Explanatory Statement outlines that the Horticulture Code provides for agreements to be for any
term agreed by a grower and a trader. Equally, parties may choose not to set a specific term and enter an
agreement on a transaction-by-transaction basis.
3
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Issues Paper: Review of the Horticulture Code of Conduct
 if commission and agent’s fees are charged on a percentage basis, or any other basis and
specify the amounts or rates of the commission and fees
 if the agent will pursue bad debts of the grower and whether the grower has a role in
pursuing bad debts (subclause 9(3)).
Merchants must also specify these additional matters in a horticulture produce agreement with
a grower:
 if the price of the horticulture produce will be agreed before or upon delivery
 the period within which the merchant will pay the grower
 the reporting period of the agreement and the period during which a statement must be given
to the grower for the reporting period (subclause 9(4)).
The horticulture produce agreement may contain any other terms and condition not
inconsistent with the Horticulture Code as agreed between the grower and the trader (subclause
9(5)).
Where a horticulture produce agreement is for a period of 90 days or more, the Horticulture
Code imposes two additional requirements:
 legal advice is to be obtained before the agreement is made
 a cooling-off period applies.
Under clause 8 of the code, before executing the agreement that is to be for a term of 90 days or
more (subclause 8(1)), a trader must ask a grower to provide either a signed statement that:
 the grower has received independent legal advice about the agreement; or
 the grower has been told by the trader that independent legal advice should be sought about
the proposed agreement but has decided not to seek the advice.
A trader under a horticulture produce agreement that has been operating for 90 days or more
must ask the grower to provide a statement of the kind set out in subclause 8(1), unless this
statement has previously been requested in accordance with subclause 8(1) (subclause 8(2)).
This clause would capture those horticulture produce agreements that do not specify a
timeframe, but operate for 90 days or more.
The trader must ask the grower for the statement within 14 days after the end of the 90 day
period and the grower must comply with this request within 21 days of receiving it (subclauses
8(3)-(4)).
Clause 8 does not prevent a trader requiring a grower to give the trader a signed statement that
the grower has received independent legal advice about the proposed horticulture produce
agreement (subclause 8(5)).
The Horticulture Code provides that if the term of a horticulture produce agreement is for a
period of 90 days or more, either party to the agreement can terminate the agreement within 14
days of the agreement being entered into, unless a shorter or longer period is agreed (subclause
11(1)). The cooling-off period cannot be reduced by more than seven days and can only be
reduced where the trader has received a signed statement from the grower that they have
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Issues Paper: Review of the Horticulture Code of Conduct
sought independent legal advice or declined to do so, despite being advised by the trader that it
should be sought (subclauses 11(4)-(3)).
To avoid doubt, if a horticulture produce agreement is terminated during the cooling-off period,
any trade that has occurred under the agreement before the termination is governed by the
terms of the agreement (subclause 11(5)). Any payment that was made for the purposes of, and
directly related to, trade that would have occurred after the termination of the agreement must
be returned to the party who made the payment within 14 days of termination, less any
reasonable expenses incurred (subclauses 11(6)-(7)).
Acceptance by trader of deliveries under an agreement
Except as provided for in clause 13 of the Horticulture Code, a trader must accept horticulture
produce delivered under a horticulture produce agreement (subclause 13(1)). A trader may
reject horticulture produce if the circumstance requiring the rejection is specified in the
horticulture produce agreement as a circumstance in which produce may be rejected arises
(subclause 13(2)). If produce is rejected by the trader, the trader must immediately advise the
grower that the produce has been rejected - by telephone, fax, email or other electronic means
(subclause 13(3)). The trader must then advise the grower in writing of the rejection and the
reasons for the rejection within the period specified in the horticulture produce agreement
(subclause 13(4)).
The Horticulture Code allows for a horticulture produce assessor to investigate and report on
whether the rejection of the produce was in accordance with the requirements of the code and
the horticulture produce agreement (subclause 40(4)(a)).
An assessor can be appointed by a grower or a trader regardless of whether a dispute has been
lodged under the Code (clause 41). It is intended that rapid discovery of the facts by
independent assessors will resolve many issues and concerns without the need for mediation or
expensive legal action. This might particularly relate to quality issues in the case of rejections.
Growers and traders subject to the code are required to provide necessary access to these
assessors to perform their assessment (clause 42).
The costs of appointing an assessor will be met by the party who appoints the assessor. If the
assessor is appointed as part of mediation, then the parties will share the costs unless the
parties agree otherwise (clause 44).Horticulture produce assessors and their role as it relates to
dispute resolution under the code are discussed in more detail in Part 4: Dispute resolution and
enforcement under the Horticulture Code.
Due care and skill
The Horticulture Code requires that a trader exercise all reasonable care and skill in handling
and storing a grower’s produce to ensure that it remains of the highest quality possible
(subclause 14(1)). This requirement must be exercised until ownership of the produce is
transferred to either the merchant (in the case of merchants) or a purchaser (in the case of
agents) (subclause 14(2)).
Time for payment
The trader must pay the grower for produce delivered under the horticulture produce
agreement within the period specified in the agreement or the grower may take one or both of
these actions:
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Issues Paper: Review of the Horticulture Code of Conduct
 suspend any future deliveries under the agreement until the amount owed is paid
 cancel the agreement (subclauses 15(1)-(2)).
Before taking any action, the grower must give written notice to the trader of the grower’s
intention to take the action (subclause 15(3)).
Matters relating to trading relationships between agents
and growers
The Horticulture Code outlines a number of requirements specific to the agent-grower
relationship.
Payment of proceeds of sale
Within the period specified in the horticulture produce agreement, the agent must pay to the
grower any proceeds the agent receives for the sale of the produce under the agreement, less:
 any commissions and agents’ fees permitted under the agreement
 any extra amounts that may be deducted under the agreement (clause 17).
Duties of agent
The agent must:
 act in the best interests of the grower when selling produce under the agreement
 not sell the grower’s produce, other than on an arm’s length basis, unless the agent has first
obtained the grower’s consent to do so (clause 18).
Agent’s obligation to pursue bad debts
The agent must pursue a bad debt of the grower for the sale of the grower’s produce under the
agreement on the basis, and to the extent, provided for in the agreement (clause 19).
Bad debt of the grower occurs where:
 an agent arranges for a person to buy the horticulture produce of a grower
 the person does not pay the agent for some or all of the produce by the time that payment is
required for the produce (subclause 3(2)).
If, however, the horticulture produce agreement gives the grower a role in pursuing bad debts,
the agent must give the grower information for the purposes of recovering the debt if requested
by the grower.
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Issues Paper: Review of the Horticulture Code of Conduct
Agent must report to grower
The agent must give the grower a statement for the reporting period4 (subclause 20(4)),
specifying for the grower’s produce received by the agent during the reporting period:
 the date/s of the sale of the produce by the agent
 the type and quality of produce sold
 the price received for the produce sold
 details of each amount deducted by the agent from the sale price of the produce
 the time and date the produce was delivered to the agent
 details of any amounts of the produce received by the agent during the period and not sold by
the agent during that period
 details of any amounts of the produce not sold during that period but destroyed by the agent
at the end of that period
 if produce that is delivered to the agent during the period is not sold by the end of the period,
the reasons why the produce was not sold (clause 20).
The agent is not required to give the grower the name of contact details of the person that
bought the produce (subclause 20(3)).
This statement must be given within the statement period5 (subclause 20(4)).
Ownership of horticulture produce does not pass to the agent
Ownership of horticulture produce covered by the agreement remains with the grower until the
agent sells the produce (clause 21).
Inspection of records
A grower, or a representative of the grower, may ask the agent to provide for inspection by the
grower/representative, records of the agent that:
 relate to the sale of the grower’s produce under the agreement
 deal with trade occurring on or after 14 May 2007 (subclause 22(1).
The request must specify the period that the request relates to and must not exceed 12 months
before the date of the request (subclauses 22(2)-(3)).
Reporting period is defined by subclause 20(4) as the period specified in the horticulture produce
agreement as the period for which the agent must report to the grower.
4
Statement period is defined by subclause 20(4) as the period specified in the horticulture produce
agreement as the period in which a statement for a reporting period must be given.
5
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Issues Paper: Review of the Horticulture Code of Conduct
The agent must make available for inspection all records requested in accordance with the code,
other than the names and contact details of the persons to whom the grower’s produce was sold
(subclause 22(4)).
Matters relating to trading relationships between
merchants and growers
The Horticulture Code outlines a number of requirements specific to the merchant-grower
relationship.
Price for horticulture produce
The price that is to be paid by the merchant for the purchase of the grower’s produce must only
be an amount, not a method for calculating an amount (subclause 25(1)). This amount must be
agreed in writing between the merchant and the grower either before, or immediately upon,
delivery of the produce to the agent (subclause 25(2)).
Fees and commissions
The merchant must not charge the grower a fee, commission of any other amount for services
performed by the merchant under the horticulture produce agreement (clause 26).
Ownership of horticulture produce
Ownership of the produce passes from the grower to a merchant:
 if the price of the produce has been agreed to by the merchant and grower before delivery—
on delivery of the produce to the merchant
 if the price of the produce has not been agreed to before delivery—at the time that the
merchant and the grower agree on a price for the produce (clause 27).
Merchant must report to grower
The merchant must give the grower a statement for the reporting period6, specifying for the
grower’s produce received by the merchant during the reporting period:
 the quantity and quality of produce bought by the merchant
 the date or dates of the purchases
 the price paid for the produce
 the time at which the produce was delivered (clause 28).
This statement must be given within the statement period (subclause 28(3)).
6Reporting
period is defined by subclause 28(3) as the period specified in the horticulture produce
agreement as the period for which the merchant must report to the grower.
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Issues Paper: Review of the Horticulture Code of Conduct
Part 2 issues for consideration
Should the code include any exceptions – why or why not?
Should the scope of the code be expanded to include processors, retailers, and Australian based exporters?
Are parties still operating under pre-code contracts? Why?
Have parties to pre-code contracts had a need to vary their contracts but refrained from doing so? Why?
Should pre-code contracts be captured by the code? Why or why not? How?
Do the requirements in the code align with good business practices for trade in horticulture produce
between growers and traders? Please describe these good business practices.
Does the code meet the operational, functional and practical needs of the sector? If not, what needs to be
changed?
Do the requirements of the code prevent or limit business practices by growers and traders? If so, what
are these and how are they impacted?
Are template terms of trade useful for both growers and traders? Are they used as a basis for horticulture
produce agreements? Is there a need to develop a simple standard contract to be used for trade in
horticulture produce to be annexed to the Horticulture Code?
Do traders and growers negotiate a trader’s terms of trade before entering into a horticulture produce
agreement? Are there elements of the terms of trade that a trader is unwilling to negotiate?
If you are a grower that has been unable to negotiate, what have you tried to negotiate, why was the
negotiation of this term important and what did you do in response to the trader not wanting to
negotiate?
Is the distinction between merchant and agent clear?
Are the different requirements for agents and merchants trading with a grower appropriate? If not, what
changes are needed?
Are the processes adequate for quick on site resolution of a problem on delivery?
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Issues Paper: Review of the Horticulture Code of Conduct
3 Trading arrangements in the
horticulture sector
As discussed in Part 1: Background, Australia’s horticulture industry is highly diverse. This
diverse industry covers a large geographical area, creating a need for transportation of fresh
produce over long distances to central markets or other distribution sources, to ensure
continuous domestic fresh supply. Similarly, the varied Australian climate means that fruit and
vegetables grown in different regions will become available at different times of the year.
The horticulture supply chain
At the time the code was introduced, competition along the horticulture supply chain was
generally highly intense, with a large number of growers and traders operating in each market
place, and traders generally handling a wide range of horticultural produce (CIE n.d.). Since this
time, there has been a consolidation and specialisation of wholesale traders.
A key problem that horticulture growers faced at the time the code was introduced in 2007 was
the low level of transparency in transactions. Due to the competitive imperative to keep
transaction costs low, traders who wished to provide clear and transparent trading terms faced
difficulties competing against those who had cost advantages by not providing such information
(CIE n.d.). This was most problematic for smaller growers who were located long distances from
markets (for example a mango grower in the Northern Territory selling their produce in the
Sydney central market). These growers were often disadvantaged due to their limited ability to
access market information, as well as the higher costs involved with finding and establishing a
relationship with an alternate trader to handle their produce.
The wholesale sector
At the time the Horticulture Code was introduced, the majority of horticulture traders operated
from the central markets located in Melbourne, Sydney, Brisbane, Adelaide and Perth (CEI n.d.).
Wholesale trade is however concentrated in Victoria and New South Wales, which collectively
account for almost 60 per cent of industry establishments. Traders with an ability to source
produce from a wide geographical distribution and have sources of selling produce, hold a
significant advantage in acquiring large demand contracts, however the largest businesses still
only control a small share of the total horticulture wholesale trade (IBISWorld 2015).
At the time the RIS was developed, CIE found that there were few barriers to entry to becoming
a wholesaler, due to modest capital requirements, compared to many small scale businesses, and
requirements for entry to trade within a central market did not appear onerous (CIE n.d.).
Today, costs associated with buying or renting floor space in a central market and access to cool
rooms, ripening facilities and the like may impose significant entry barriers for wholesale
traders.
At the time the code was introduced, traders were generally small businesses, often multigenerational family businesses (almost 40 per cent of fruit and vegetable wholesalers are family
owned businesses) and a key factor distinguishing traders appears to be experience and the
establishment of relationships with growers and suppliers (CIE n.d.).
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Issues Paper: Review of the Horticulture Code of Conduct
In addition to competition between traders, traders also compete for access to produce with the
major retailers and exporters (parties not covered by the code). For some products, they also
compete with packers and growing cooperatives (parties covered by the code). This means that
growers may have options when searching for a channel into the market for their produce.
Key success factors for horticultural trading businesses generally include their networks and
relationships within the market, ability to guarantee supply of produce, ability to communicate
and negotiate with growers, stock control and turnover, as well as financial and debt
management skills (IBISWorld 2015).
Since 2007, fruit and vegetable growers are also increasingly trading directly with major
supermarket chains and other retail outlets (IBISWorld 2015). However, the Australian National
Retailers Association stated in their response to the Agricultural Competitiveness White Paper
that only 5 per cent of farm gate produce is purchased by the retail sector – processors (33 per
cent) and exporters (32 per cent), followed by the wholesale sector (16 per cent) dominate farm
gate sales (ANRA 2015).
Trading relationship arrangements
Figure 1 and Figure 2 provide examples of possible trading relationships under the Horticulture
Code.
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Issues Paper: Review of the Horticulture Code of Conduct
Figure 1 Grower–merchant transactions
Grower
Merchant and
grower agree to a
price for produce
Produce is
delivered and
ownership
transferred to
merchant
Grower
Merchant pays
grower agreed
price
Product is
delivered to
merchant by
grower
Merchant pays
grower agreed
price
Merchant and
grower agree to
a price for
produce before
delivery
Merchant
Merchant
Price set before delivery
Merchant and
grower agree to a
price and
ownership is
transferred
Price set on delivery
Figure 2 Grower–agent transactions
Grower engages
trader as an agent to
find a buyer
Grower
Agent pays grower for
goods less any
deducted
commission/fee
Agent
Grower transfers
produce to agent but
retains ownership
Agent finds a buyer
Agent deducts
commission/fees after
selling goods
Buyer pays agent for
goods
Ownership of goods
transferred to buyer
As outlined in Part 2: Application of the Horticulture Code, horticultural traders are required to
identify in a horticulture produce agreement if they are trading as an agent or a merchant. This
is intended to prevent ‘hybrid’ trading. The Horticulture Code’s RIS noted that in 2007 ‘the
distinction between merchant wholesaler and agent/broker wholesalers is blurred’. It was
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Issues Paper: Review of the Horticulture Code of Conduct
alleged that many of these ‘hybrid’ traders would not declare their intended role to the grower
until they secured a transaction (CIE n.d.). A hybrid system of trade creates uncertainty as to
when ownership of produce transfers and when and how price is determined, allowing the
trader to maximise their profits and minimise their risk in the marketplace. This results in the
grower bearing all of the risk in a given transaction. To respond to these concerns, the
Horticulture Code prohibited traders acting as both an agent and a merchant under a single
horticultural produce agreement.
Part 3 issues for consideration
Have there been any changes to the trading environment of horticulture produce since the Horticulture
Code’s introduction that affects the operation of the code? If yes, how?
Are ‘hybrid’ trading relationships still occurring outside of the Horticulture Code? If so, what impact does
this have?
How transparent is the horticultural supply chain today? Has the code improved transparency in the
supply chain since its introduction? If not, why? How can transparency in the sector be further improved?
To what extent has the specialisation of wholesalers by product or commodity lines reduced the choice of
grower selling options?
What impact has the increased presence of retailers in purchasing fresh product had on the trading of
horticulture produce within Australia?
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Issues Paper: Review of the Horticulture Code of Conduct
4 Dispute resolution and enforcement
under the Horticulture Code
The Horticulture Code may be enforced through private legal action or the ACCC. The
Horticulture Code also provides a dispute resolution mechanism.
Dispute resolution under the Horticulture Code
Dispute resolution under the Horticulture Code is outlined in Part 5 of the code. Disputes can
arise out of a number of issues, including non-payment, delayed payment, discrepancy in the
amount owed/paid, and quality of produce. In addition to the procedures included in the code
and the services offered by the Horticulture Mediation Adviser (HMA), the contact for all
inquiries relating to mediation under the code, parties operating under the Horticulture Code
can also lodge a complaint with the ACCC where they believe that the other party may have
breached the code or the ACL. Parties can also access alternative dispute resolution services
from other providers, such as a state small business commissioner. Nothing in the code affects
the right of a party to take legal proceedings.
The Horticulture Code provides that growers and traders may use any dispute resolution
procedures they choose to resolve disputes that arise between them. However, if a grower or
trader initiates a dispute under the dispute resolution process set out in the Horticulture Code,
the other party (the respondent) must participate in that process. This process requires that
parties must first attempt to resolve the dispute themselves. However, if after three weeks no
agreement has been reached either party may seek to appoint a mediator. Both parties must
then attend mediation and try to resolve the dispute.
While the Australian Government subsidises the mediator's fees, parties must pay their own
expenses to attend mediation sessions. Parties must also share the costs for any
videoconference, teleconference, venue or travel costs incurred by the mediator. When
requesting the appointment of a mediator, the person making the complaint needs to pay an
application fee of $50.
To summarise, the dispute resolution procedure outlined in the Horticulture Code is as follows:
1) The complainant must give written notice to the respondent of a dispute and specify that the
complainant is using the procedure outlined in the code to resolve the dispute. The notice
must specify:
 the nature of the dispute
 what action the complainant thinks will settle the dispute
 what outcome the complainant wants.
2) The complainant and the respondent must then try to resolve the dispute.
3) If the parties cannot resolve the dispute within three weeks, either party may ask the HMA to
appoint a mediator for the dispute. A mediator must be appointed within 14 days after the
request has been received and parties must be provided details of the mediator appointed.
The HMA must not appoint a mediator if the adviser is satisfied that the complaint giving rise
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Issues Paper: Review of the Horticulture Code of Conduct
to the dispute is frivolous, vexatious or has been the subject of mediation under the code
previously.
4) The mediator must decide:
 how the mediation is to be carried out (for example, by telephone or in meetings)
 the time and place for the mediation (the mediation must be conducted within Australia)
 the day that the mediation commences.
5) The parties must attend mediation and try to resolve the dispute and within 14 days of the
mediation commencing, the mediator must notify the HMA that the mediation has started and
the nature of the dispute.
6) If parties reach an agreement, the mediator must:
 set out in writing the terms of the agreement
 give a copy of the terms to each of the parties
 notify the HMA within 14 days that the parties have reached an agreement.
This agreement will be a legally enforceable contract and parties may pursue a breach of
contract.
7) The mediator may terminate the mediation at any time if:
 the mediator is satisfied that a resolution of a dispute is not likely to occur
 the complainant asks the mediator to terminate the mediation
 30 days have elapsed since the start of mediation, the dispute has not been resolved and
the respondent asks the mediator to terminate the mediation.
8) If the mediator terminates the mediation, the mediator must issue a certificate to the HMA
and each of the parties stating:




the names of the parties
the nature of the dispute
that mediation has finished
that the dispute has not been resolved.
9) The complainant may withdraw the dispute at any time.
The role of Horticulture Produce Assessors and the
Horticulture Mediation Adviser
Under the Horticulture Code, the Minister for Agriculture may appoint a mediation adviser. The
mediation adviser appointed under the code is the HMA and their role is to help parties resolve
disputes and, on request, appoint mediators from a specialist panel of experienced mediators
across Australia. In addition, the HMA provides general advice on codes and dispute resolution
processes, education, and reporting and evaluation.
The Horticulture Code provides that the mediation adviser must compile and publish a list of
persons who are to be horticulture produce assessors, including their relevant qualifications
(clause 39). The code does not specify what relevant qualifications a horticulture produce
assessor must have to be listed as an assessor under the Horticulture Code. Horticulture produce
assessors may also operate privately outside of the Horticulture Code.
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Issues Paper: Review of the Horticulture Code of Conduct
The role of a horticulture produce assessor is to investigate and report on any matter arising
under a horticulture produce agreement, including whether horticulture produce has been
rejected in accordance with the horticulture produce agreement and whether the amount paid
by a trader to a grower was calculated in accordance with the Horticulture Code and the
horticulture produce agreement (clause 40). Once the horticulture produce assessor has issued
their report, they no longer have a role and it is up to the parties and/or the mediator to a
dispute to act upon the findings in the report.
Under clause 41 of the Horticulture Code, either party to a horticulture produce agreement may
appoint a horticulture produce assessor, regardless of whether a dispute has been notified
under the code, or a mediator may appoint a horticulture produce assessor.
Although there are no figures on the use of horticulture produce assessors, the HMA
understands that horticulture produce assessor services are being used by parties within the
horticulture industry as a method for resolving disputes relating to horticulture produce.7
Although the services of the HMA may be appropriate in some cases, horticulture produce
assessors may have a greater role to play, particularly where perishable produce is concerned.
The horticulture produce assessor is available as a faster alternative to mediation and could
assist parties to resolve disputes as they arise, such as at the point of delivery.
It is notable that general uptake of dispute resolution under the Horticulture Code is low. Since
the code’s introduction in 2007, there have only been 89 inquiries to the HMA, and the HMA has
only appointed a mediator on 14 occasions, with only 12 mediations conducted under the code.
Table 1 provides further detail.
Table 1 Use of the Horticulture Mediation Adviser
Category
Number of dispute
enquiries
Number of mediator
appointments
Number of mediations
conducted
2007–
08
2008–
09
2009–
10
2010–
11
2011–
12
2012–
13
2013–
14
2014– Total
15a
21
7
12
7
13
8
12
9
89
2
0
1
4
2
0
3
2
14
1
0
1
3
3
0
1
3
12
a Data from 1 July 2014 to 31 March 2015.
Table 2 summarises the dispute enquiries by state. Notably, the majority of enquiries have come
from Queensland.
7
See, for example, HMA Annual Report 1 July 2013 – 30 June 2014.
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Issues Paper: Review of the Horticulture Code of Conduct
Table 2 Horticulture Mediation Adviser dispute enquiries by state
Year
ACT
NSW
NT
Qld
SA
Tas.
Vic.
WA
Total
2007–08
0
3
0
11
2
0
5
0
21
2008–09
0
1
0
3
0
0
3
0
7
2009–10
0
0
2
3
1
0
4
2
12
2010–11
0
0
0
3
1
0
2
1
7
2011–12
0
2
0
7
0
0
1
3
13
2012–13
0
0
1
4
0
0
1
2
8
2013–14
0
2
0
6
3
0
1
0
12
Total
0
8
3
37
7
0
17
8
80
The HMA has received enquiries in relation to a range of different product types. The highest
number of enquiries was in relation to mangoes, bananas, pumpkins, apples and pears.
In 2011 the code’s dispute resolution service was enhanced to include an early intervention
service. The introduction of the early intervention dispute resolution service allows parties to:
 talk through their concerns at an early stage
 receive guidance on what their next steps might be in resolving their dispute
 address their issues of concern before they become entrenched in a dispute
 maintain ongoing commercial relationships while avoiding the time, expense and stress
associated with formal dispute resolution mechanisms.
Table 3 summarises the early intervention activity undertaken by the HMA, including referrals
to other organisations.
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Issues Paper: Review of the Horticulture Code of Conduct
Table 3 Early intervention action taken by the Horticulture Mediation Adviser
Category
July 2011 to March 2015
Educative advice on code given
42
Explanation/ Information provided on HMA service
42
Role of ACCC explained
15
Legal advice encouraged
10
Referred to lawyer/consultant
6
Involved/referred to other organisation
5
Direct negotiation encouraged
30
HMA raised issue with other party
11
Early intervention facilitation of dispute offered
16
Early intervention facilitation of dispute occurred
4
Suggested referral to an assessor
0
Facilitated agreement re: location
3
Total applications for mediation
6
Total mediations conducted
3
Total number of enquiries
42
Note: Most enquirers receive more than one form of early intervention assistance.
The role of the ACCC in enforcement of the Horticulture
Code
The ACCC is an independent statutory authority with responsibility for enforcement of the
Commonwealth’s competition, fair trading and consumer protection laws. As part of this, it
educates the industry about the application of the Horticulture Code, the ACL, and other fair
trading and competition laws.
In enforcing the Horticulture Code, the ACCC has undertaken enforcement actions for breaches
of the Horticulture Code on nine occasions since the code’s introduction. This includes six
occasions in 2008, and once each in 2009, 2011 and 2013 (ACCC n.d.c). Since being given the
power in 2010, the ACCC has also conducted 15 Horticulture Code audits, with one audit (V & A
Liangos Pty Ltd) revealing non-compliance with the Horticulture Code, and two warning letters
being sent for possible breaches of the Horticulture Code. Table 4 outlines the number of
contacts the ACCC has received in relation to the Horticulture Code.
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Issues Paper: Review of the Horticulture Code of Conduct
Table 4 Contacts to the Australian Competition and Consumer Commission
Category
2007
2008
2009
2010
2011
2012
2013
2014
2015a
Total
61
40
11
16
8
3
4
2
2
147
Enquiries
151
35
11
5
6
4
4
2
0
218
Total
212
75
22
21
14
7
8
4
2
365
Complaints
a Data from 1 July 2014 to 31 March 2015.
Stakeholders’ views on dispute resolution under the
Horticulture Code
In its 2008 review of grocery prices, the ACCC made two recommendations in regards to dispute
resolution under the Horticulture Code:
 that the costs incurred by the parties to a dispute under the Horticulture Code dispute
resolution procedure be subsidised by the Australian Government to the same extent as the
(now defunct) voluntary Produce and Grocery Industry Code of Conduct
 the implementation of further education initiatives regarding the Horticulture Code and its
dispute resolution procedures, including the role of assessors in resolving disputes.
The Australian Government did not respond to these recommendations.
The Australian Government asked the Productivity Commission to undertake a 15-month
inquiry into Australia's system of civil dispute resolution, with a focus on constraining costs and
promoting access to justice and equality before the law. In September 2014 the Productivity
Commission presented its Access to Justice Arrangements inquiry report to the Australian
Government (PC 2014). The report was publically released in December 2014, before being
tabled in each house of Parliament.8 The report recommended that the government reconsider
the need for certain high-cost, low-volume complaints services, including the dispute resolution
services provided under the Horticulture Code. The recommendation noted that consideration
should be given to subsuming new roles within existing ombudsmen rather than creating new
bodies. The Australian Government has not responded to the recommendations made in this
inquiry.
In its submission to the consultation paper on the draft Food and Grocery Code of Conduct,
Improving Commercial Relationships in the Food and Grocery Sector, the Victorian Farmers
Federation (2014) called for an ombudsman to be appointed to oversee the Horticulture Code.
The National Farmers’ Federation (NFF) noted in its submission to the Harper Review issues
paper that the low uptake of dispute resolution and that many growers are unwilling to bring
disputes forward due to fear of market retaliation, provides evidence that the code is not
Under the Productivity Commission Act 1998, the Australian Government is required to table the report in
each House of the Parliament within 25 sitting days of receipt.
8
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Issues Paper: Review of the Horticulture Code of Conduct
influencing the behaviour of market participants as intended by a code of conduct. The NFF
expressed the view that there is a need for strong third party enforcement to provide the level of
deterrent necessary to ensure compliant behaviour with the code. The NFF recommended that
the Horticulture Code include a more robust and accessible dispute resolution procedure, such
as expert determination9, which would encourage uptake of dispute resolution procedures and
provide a more level playing field in resolving disputes.
Consequences of a breach of the Horticulture Code
The CCA states that a person must not, in trade or commerce, contravene an applicable industry
code. Therefore, a breach of the Horticulture Code is a breach of the CCA and the enforcement of
the Horticulture Code is through the enforcement provisions of the CCA by the ACCC.
Possible consequences of breaching the Horticulture Code are:
 payment of compensation for loss caused by the contravening conduct (CCA, section 82)
 injunctions (i.e. orders that a party must do, or stop doing, an act) (CCA, section 80)
 remedial orders of a court including an order to void the whole or part of a contract, vary a
contract, refuse to allow the enforcement of some provisions of the contract, or require the
payment of refunds and/or damages to the aggrieved party (CCA, section 87)
 court enforceable undertakings to the ACCC (CCA, section 87B)
 public warning notice issued by the ACCC (CCA, section 51ADA)
 non-punitive orders, made by a court, such as a community service order, a probation order,
a disclosure order and/or the publication of corrective advertisements (CCA, section 86C).
A court is able to apply a range of remedies under the CCA when it determines that a breach of
the Horticulture Code has occurred. These remedies are aimed at providing redress to
participants in the event of a breach of an industry code (rather than being a punitive action).
This reflects government policy that industry codes made under Part IVB of the CCA are coregulatory measures aimed at achieving minimum standards of conduct in an industry rather
than a stricter form of regulation. Refer to Part 1: Background for more information.
Expert determination is a procedure by which the parties to a dispute appoint an independent and
neutral expert to determine the dispute in private. Like arbitration, it allows trade secrets and other
sensitive information to be kept out of the public domain. The expert will be a person with specialist or
technical knowledge relevant to the dispute.
9
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Issues Paper: Review of the Horticulture Code of Conduct
Infringement notices
Infringement notices under the ACL are designed to provide a timely, cost-efficient enforcement
outcome in relation to relatively minor contraventions of the CCA. Unlike a pecuniary penalty
imposed by a court, an infringement notice is issued by the ACCC without the involvement of the
courts.
The ACCC can issue an infringement notice where it has reasonable grounds to believe a person
has contravened provisions of the ACL, including those relating to false or misleading
representations about business activities and unconscionable conduct.
Payment of an infringement notice is not an admission by the recipient that they have breached
the law. The penalty amount in an infringement notice will vary, depending on the alleged
contravention, but in most cases is fixed at $10 800 for a corporation (or $108 000 for a listed
corporation) and $2160 for an individual for each alleged contravention (ACCC n.d.b). The
penalty to be specified in an infringement notice is calculated in accordance with section 134C of
the CCA. The amount payable under infringement notices is usually much less than might be
awarded by a court when ordering a pecuniary penalty.
On 1 January 2015, amendments to the CCA came into effect to allow the ACCC to issue
infringement notices of 50 penalty units (currently $9000) for corporations and 10 penalty units
(currently $1800) in any other case, where it has reasonable grounds to believe a breach of a
civil penalty provision of an industry code had occurred. These amendments formed part of the
broader reform package for the new Competition and Consumer (Industry Codes—Franchising)
Regulation 2014 (Franchising Code), which commenced on 1 January 2015.
The ACCC cannot issue an infringement notice for a breach of the Horticulture Code.
Pecuniary penalties
In 2015, as part of the reforms to the Franchising Code, amendments to Part IVB of the CCA
commenced to allow industry codes to include civil penalty provisions. These provisions are
currently included in the Franchising Code, which allows the court to impose a maximum
pecuniary penalty of up to 300 penalty units (currently $54 000) per contravention for failure to
comply with a civil penalty provision of the Franchising Code. Separately, the ACCC can issue an
infringement notice of $9000 to a company or $1800 to an individual if the ACCC has reasonable
grounds to believe that a person has contravened a civil penalty provision of an industry code.
While traders and growers cannot currently incur a pecuniary penalty for a breach of the
Horticulture Code, a court can impose a pecuniary penalty for a breach of certain provisions of
the ACL, including provisions relating to false or misleading representations about business
activities and unconscionable conduct. The same conduct could constitute a breach of both the
Horticulture Code and the ACL. For example, an agent may impose fees on a grower in a manner
which is both unconscionable and violates the terms of the horticulture produce agreement.
* Please note that the value of a penalty unit is subject to change.
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Issues Paper: Review of the Horticulture Code of Conduct
Part 4 issues for consideration
Are the dispute resolution and enforcement mechanisms under the Horticulture Code effective? How can
these be improved?
Is the Horticulture Mediation Advisor role effective? If not, how can it be improved or what should take its
place, if anything?
Could the Horticulture Code be amended to improve the utility of assessors? If yes, what amendments
could be made and why?
Are alternative dispute resolution services provided by those other than the HMA effective for resolving
disputes arising under the Horticulture Code? If so, should state-based ombudsmen/commissioners have
a greater role in enforcing the Horticulture Code?
Should the Horticulture Code include the ability to impose pecuniary penalties? If so, under what
circumstances and to what amount should pecuniary penalties be applied?
Is the fear of retaliation by a trader preventing a grower from making a complaint?
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Issues Paper: Review of the Horticulture Code of Conduct
5 Effectiveness of the Horticulture
Code
The purpose of the Horticulture Code is to improve the clarity and transparency of trading
arrangements between growers and traders. Prior to the introduction of the code, anecdotal
evidence suggests that verbal arrangements were not uncommon.
The 2008 ACCC Grocery Pricing Inquiry (discussed in Part 1: Background) considered the
Horticulture Code and made a number of amendments to improve the effectiveness and
workability of the code. Some of the issues raised during this inquiry are still relevant today.
Since the Code’s introduction, a number of issues have been raised as matters that impact on the
effectiveness of the code, including:
 pre-code contracts
 the scope of the code (that is, the exclusion of retailers, processors and exporters), which is
seen by some to create a lack of supply chain transparency and impact on market behaviour
along the supply chain
 the lack of clarity in the code
 delivery and acceptance of horticulture produce
 an inability for growers to negotiate a trader’s terms of trade for inclusion in their
horticulture produce agreement, particularly for those with perishable produce
 inappropriate behaviours.
Pre-code contracts
Anecdotal evidence suggests that the majority of transactions between growers and traders of
horticulture produce still occur outside the code under written contracts entered into prior to
the code’s registration on 15 December 2006 (a pre-code contract). There have been calls,
including by growers, for these contracts to be included under the code.
In response to the 2008 ACCC recommendation to include pre-code contracts, exporters and
wholesalers considered the amendment to be unnecessary because it would take away the
flexibility that long-term trading partners had established before the inception of the code. Some
stakeholders disagree with claims that the Horticulture Code provides flexibility. The
Horticulture Code Committee believed that parties operating under pre-code contracts should
be given a period of time to amend their contracts to be code compliant.
Once a pre-code contract is been varied, it is covered by the Horticulture Code. The Explanatory
Statement accompanying the introduction of the code explained that ‘varied’ could mean that
the written agreement is amended, extended or transferred.
Section 51(xxxi) of the Constitution provides that the Australian Government may make laws
with respect to ‘the acquisition of property on just terms from any State or person for any
purpose in respect of which the Parliament has power to make laws’. Section 51(xxxi) requires
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Issues Paper: Review of the Horticulture Code of Conduct
consideration when discussing whether or not to include pre-code contracts in the Horticulture
Code as written contracts may amount to ‘property’, making the Constitution and the definition
of ‘just terms’ relevant factors to be considered by the reviewers.
The scope of the Horticulture Code
The Horticulture Code applies to transactions relating to horticulture produce between a grower
and trader acting as either a merchant or an agent.
In its 2008 inquiry into the grocery sector, the ACCC recommended that the Horticulture Code
be amended to regulate first point of sale transactions of horticulture produce between a grower
and a retailer, exporter or processor. The majority of grower groups and wholesaler groups who
made submissions to the Horticulture Code Committee supported the expansion of the code to
all first point of sale transactions, generally due to a ‘one in, all in’ philosophy.
Those not operating under the code, however, did not support the extension and raised concerns
around compliance costs and the inability to continue current industry accepted business
practices under the mandatory regulations. The code was written to regulate specific behaviours
in the relationship between growers and traders. If it was to be extended to include exporters,
processors or retailers it would require considerable amendment to adapt to the practices of
those industries. For example, processors of horticulture produce would include winemakers
who use a different business model and where there are a range of other issues.
Grower to retailer, exporter or processor transactions were excluded from the code as these
transactions, unlike grower-trader transactions, were viewed as transparent and clear and the
purpose of the Horticulture Code is to ensure transparency and clarity of transactions. Since the
code was first made there has been an increase in trade of horticulture produce directly from
growers to others in the supply chain. There has also since been the introduction of the Food
and Grocery Code.
The Horticulture Code also excludes traders and growers trading under a statutory potato
marketing scheme. As discussed in Part 2: Application of the Horticulture Code, the only
statutory potato marketing scheme is operated by the West Australian Potato Marketing
Corporation, which is being abolished. Therefore, it would appear that by the time any changes
are made to the code this exemption would be redundant.
In its 2008 Grocery Pricing Inquiry Report, the ACCC recommended that the Horticulture Code
be amended to exempt a transaction between a grower and a cooperative/packing house, in
which that grower has a significant interest. However, in 2009 the Horticulture Code Committee
stated that it was concerned that implementing this recommendation would introduce an
exemption with little benefit because the Committee believed that the nature of the transaction
between a grower and a cooperative/packhouse is indistinguishable from that between a
grower and a wholesaler. The Committee therefore believed that exempting cooperatives and
packhouses from the Code was contrary to the Code’s purpose and that the grower is no longer
in direct control of their produce once it has been sent to the cooperative/packhouse. Industry
views on this recommendation were mixed.
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Issues Paper: Review of the Horticulture Code of Conduct
Clarity in the code
Concerns about the clarity of the Horticulture Code have been raised with the reviewers. For
example, some industry stakeholders have commented that the distinction between an agent
and a merchant is unclear. The Horticulture Code does seek to define key terms to provide
guidance to those operating under the code. The Explanatory Statement accompanying the
introduction of the code also provides guidance on how the code is intended to operate.
Some traders have also raised concerns about a perceived lack of flexibility resulting from the
distinction between an agent and a merchant.
Delivery and acceptance of horticulture produce
Concerns have been raised that the code does not adequately deal with produce that does not
arrive on time or is of a different quality or grade to that expected; and cancelled orders.
The 2008 ACCC inquiry into the grocery sector recommended that produce be deemed to be
accepted by a merchant if it was not rejected within 24 hours of delivery. The Horticulture Code
Committee, in its consideration of the ACCC’s recommendations, found that a prescribed period
of 24 hours may not be reasonable for some produce, and does not account for produce which is
not ready for resale (for example, unripened bananas). They recommended that where produce
has been requested by a trader, a period of acceptance should be negotiated as part of the
contract, allowing greater flexibility where 24 hours is inappropriate.
The Horticulture Code does not specifically deal with cancellation of orders under a horticulture
produce agreement. However, it requires that a horticulture produce agreement include any
requirements the trader has in respect of delivery of horticulture produce and allows flexibility
for the terms of an individual horticulture produce agreement. This could include a clause
relating to cancelled orders to the extent it is not inconsistent with the Horticulture Code.
The Horticulture Code provides under subclauses 15(1)-(2) that a grower may take action
where the trader has not paid the grower for produce delivered. The primary recourse for a
grower facing non-payment is to either make no further deliveries or cancel the agreement.
Alternatively, failure to pay can amount to a breach of the Horticulture Code for which they can
take private legal action or refer to the ACCC. Contact details are required to be included so that
where a party has a dispute under their horticulture produce agreement they can contact the
other party.
An inability for growers to negotiate a trader’s terms of
trade
Growers have expressed concern about their lack of bargaining power and ability to negotiate
the trader’s terms of trade for inclusion in their individual horticulture produce agreements.
If passed by Parliament, the extension of unfair contract term protections to small businesses
(discussed in Part 1: Background) may offer some protection to growers. Additionally, the
introduction of good faith into the code may also help address these concerns.
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Issues Paper: Review of the Horticulture Code of Conduct
Payment for horticulture produce
The Horticulture Code does not regulate the price of horticulture produce. The code regulates
some elements relating to the payment for horticulture produce, such as when price must be
agreed and the requirement that the timeframe for payment of horticulture produce under a
horticulture produce agreement must be followed.
As part of its 2008 Grocery Pricing Inquiry, the ACCC made a number of recommendations
relating to payment for produce delivered under a horticulture produce agreement. These
include:
 Recommendation 4: Amend the Horticulture Code to require a merchant to provide a grower,
before delivery, with either a price or formula for calculating price. Any agreed method used
to calculate price must be by reference to the amount received by the merchant from the sale
of the produce to a third-party purchaser.
 Recommendation 6: Amend the Horticulture Code to enable a merchant to deduct the cost of
any services that are required to prepare the produce for resale as part of the price amount
or as part of the method for calculating the price amount.
 Recommendation 7: Amend the Horticulture Code to only permit an agent to recover their
commission for services performed under an agency agreement as a deduction from amounts
paid by a third-party purchaser.
 Recommendation 10: Amend the Horticulture Code to permit agents and growers to engage
in pooling and price averaging.
In relation to Recommendation 4, the Horticulture Code Committee believed that a method
would provide appropriate safeguards and end the situation where merchants reduce the price
they offer to growers at or before delivery to manage the risk of the fluctuating market. This was
considered to allow accurate market signals to benefit both growers and traders. The majority of
industry submissions supported the recommendation as it would provide greater flexibility for
operating under the code. The Committee considered that a number of safeguards would be
required if a method were permitted under the code.
The Horticulture Code Committee supported the implementation of Recommendation 6,
provided appropriate safeguards are put in place, such as itemised invoicing and charges to be
described and agreed in a horticulture produce agreement. Industry raised two key points – the
first in relation to the need for clarity and transparency and that implementation should not
restrict the ability to provide services or require reporting of the costs for traders to provide the
services.
The Horticulture Code Committee and traders did not support Recommendation 7, to amend the
code to only permit an agent to recover their commission for services performed under an
agency agreement as a deduction from amounts paid by a third-party purchaser. Concerns were
raised that it would impact upon normal practice and the common law dealing with agency.
Grower submissions did not comment on the impacts of this recommendation.
Recommendation 10 to amend the code to allow pooling and price averaging was supported by
the Horticulture Code Committee, provided appropriate safeguards were also implemented,
such as produce must be of the same quality specifications. The Committee suggested that this
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Issues Paper: Review of the Horticulture Code of Conduct
recommendation be implemented in conjunction with Recommendation 4 (use of a method to
calculate price). This would allow merchants and packers to pool and price average if agreed
within their horticulture produce agreement and agents and merchants would be able to
conduct business on an equal basis. Growers and traders supported this recommendation as it
would provide more flexibility within the code. Some of the concerns that led to
Recommendation 9 may also be addressed through allowing pooling and price averaging.
Inappropriate behaviours
A Code that does not promote transparent and appropriate behaviours amongst its participants,
will allow poor standards and practices of behaviour to filter into the sector. Such inappropriate
behaviours may include, but are not limited to, bullying, opportunism, boycotting, unjust
enrichment or poor communication. The Horticulture Code should seek to address these
behaviours and set a framework for improved standards of business practice in the sector.
The extent to which conduct prohibited by the Horticulture
Code still occurs
The issues that have been discussed, particularly pre-code contracts, impact upon the extent to
which conduct prohibited by the Horticulture Code still occurs and the overall effectiveness of
the code. Prohibited conduct includes operating as both an agent and a merchant under the one
horticulture produce agreement. Conduct prohibited by the code was regarded in the RIS as
detrimental and, therefore, undesirable.
Part 5 issues for consideration
Do the purposes of the Horticulture Code remain appropriate?
Do the requirements in the code improve transparency and clarity in the sector, as was intended? What
can be done to further improve transparency and clarity in the sector?
What has been considered by the sector to be a variation to a contract for the purposes of bringing precode contracts under the code? Should more agreements be covered by the code than is perceived?
Should the Horticulture Code be extended to cover all or some additional transactions in horticulture
produce and why? Alternatively, are there other exemptions that should be considered?
If the code is extended to cover others in the supply chain, what amendments to code, or other impacted
codes, will be required, if any, to account for different business practices?
Should the Horticulture Code better regulate the delivery and acceptance of produce, including what
happens where delivery and acceptance does not adhere to the horticulture produce agreement?
Are the payment provisions of the code adequate? How can these be improved?
Does conduct prohibited by the code still occur? If yes, to what extent does it occur and what conduct is
still occurring?
What sort of behaviours should the code regulate and why?
What other issues, if any, have you experienced with the code and what are the impacts of these issues?
How might these issues be rectified and what impacts will any amendments have on the sector, including
compliance costs?
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Issues Paper: Review of the Horticulture Code of Conduct
6 Other matters
Good faith
Other than good faith in common law, the current Horticulture Code does not explicitly require
growers and traders to act in good faith. However, since the Horticulture Code was first
developed, both the new Franchising Code and the Food and Grocery Code have included an
obligation for parties to act in good faith in their dealings with one another. The obligation to act
in good faith has been introduced into these codes to provide a flexible mechanism for
addressing opportunistic and unfair conduct that may fall below the threshold of more serious
misconduct provisions within the ACL or the CCA. The inclusion of a good faith obligation is
intended to build trust and improve standards of conduct.
What is good faith?
Under common law, good faith requires parties to an agreement to exercise their powers
reasonably and not arbitrarily or for some irrelevant purpose. Conduct may lack good faith
where one party acts dishonestly or fails to have regard to the legitimate interests of the other
party.
According to the ACCC, Australian courts have found business dealings to be not in good faith
when they involve one party acting on an ulterior motive, or in a way that undermines or denies
the other party the benefits of a contract.
Where else does good faith appear?
A duty of good faith is currently included in the Franchising Code, the Competition and
Consumer (Industry Codes—Food and Grocery) Regulation 2015 (Food and Grocery Code) and
the Competition and Consumer (Industry Code—Port Terminal Access (Bulk Wheat)) Regulation
2014, as well as in relation to specific provisions regarding contract variations and mediation
under the Competition and Consumer (Industry Codes—Oilcode) Regulation 2006 (Oilcode).
The duty of good faith was explored in detail as part of the 2013 review of the Franchising Code
and, in 2014, the Australian Government amended the Franchising Code to include a duty of
good faith, within the meaning of the common law from time to time10, for both franchisors and
franchisees operating under the code. This obligation applies in respect of any matter arising
under or in relation to the franchise agreement or the Franchising Code.11 The meaning of good
The meaning of good faith under the Franchising Code takes on the same meaning that exists under
common law, as it continues to develop and evolve in Australia over time. See, for example, Explanatory
Statement to F2014L01472 (the explanatory statement to the new Franchising Code), page 18.
10
This includes during negotiation, execution of the franchise agreement, renewal or extension of the
agreement, dispute resolution and in relation to obligations arising under the Franchising Code. See the
Explanatory Statement for the new Franchising Code, page 18.
11
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Issues Paper: Review of the Horticulture Code of Conduct
faith is the same as at common law, although it also applies to negotiations to enter into a
franchise agreement and dispute resolution relating to that agreement. However, a list of nonexhaustive matters that the courts may have regard to when determining whether a breach of
the obligation has occurred has been included to provide franchise participants with guidance so
that they may understand the nature of their obligation12. For example, the court may have
regard to:
 whether the party acted honestly and not arbitrarily
 whether the party cooperated to achieve the purposes of the agreement.13
A breach of this obligation can result in a civil pecuniary penalty.
The Food and Grocery Code also requires that retailers and wholesalers act in good faith
towards suppliers at all times,14 however the code does not allow for the imposition of pecuniary
penalties for a breach of this obligation. Like with the Franchising Code, the meaning of good
faith is the same as that at common law and the code includes matters that may be taken into
account when determining whether a party has not acted in good faith. In determining whether
a retailer or wholesaler has acted in good faith in dealing with a supplier, these matters may be
taken into account:
 whether the retailer or wholesaler’s trading relationship with the supplier has been
conducted without duress
 whether the retailer or wholesaler’s trading relationship with the supplier has been
conducted in recognition of the need for certainty regarding the risks and costs of trading,
particularly in relation to production, delivery and payment
 whether, in dealing with the retailer or wholesaler, the supplier has acted in good faith.
The obligation to act in good faith has been introduced into these codes to provide a flexible
mechanism for addressing opportunistic and unfair conduct that may fall below the threshold of
more serious misconduct provisions within the ACL or the CCA.
Potential applications to the Horticulture Code of Conduct
In the process of this review, it must be considered whether the benefits derived from including
a good faith provision would outweigh any potential costs. As noted in the Food and Grocery
Code Explanatory Statement 2015, costs are likely to be negligible as good faith is an
overarching obligation that already exists in the common law. In the development of the Food
and Grocery Code, submissions were generally supportive of the inclusion of an obligation to act
The Explanatory Statement for the new Franchising Code notes that these matters are broadly
indicative of the doctrine of good faith at common law.
12
13
Franchising Code, section 6(3).
The obligation does not extend to suppliers as the code only provides for retailers and wholesalers to
elect to be bound by its obligations.
14
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Issues Paper: Review of the Horticulture Code of Conduct
in good faith.15 A number of stakeholders noted that the duty to act in good faith has the capacity
to improve commercial relationships, and could prove particularly beneficial for agricultural
growers.
In providing an overarching standard of conduct for parties, a good faith provision should aim to
create legal protections to support and improve commercial relationships in the sector, rather
than add to the legal compliance obligations of growers and traders.
When considering the potential inclusion of a duty of good faith into an industry code of conduct,
it is also important to understand how it interacts with legitimate commercial interests. Under
the Franchising Code, ‘the obligation to act in good faith does not prevent a party to a franchise
agreement ... from acting in his, her or its legitimate commercial interests’ (Franchising Code,
subsection 6(6)). Guidance material by the ACCC (n.d.a) on this provision notes:
good faith requires a party to have due regard to the rights and interests of the
other party, it does not require a party to act in the interests of the other party.
Neither does it prevent a party from acting in their own legitimate commercial
interests.
Any application of an obligation to act in good faith would occur in addition to existing
requirements, as outlined in Part 1: Background. These include, but are not limited to,
prohibitions on misleading or deceptive conduct and unconscionable conduct.
International Perspectives
Australia is unique in having a specific code that covers the relationship between growers and
traders of horticulture produce. Internationally there is limited direct regulation covering this
relationship.
Additionally, in recent years the Australian market has witnessed an increase in imported
product for which the code does not apply.
Education on the Horticulture Code
The Australian Government provides a range of education material on the Horticulture Code. As
part of its role of enforcing the Horticulture Code, the ACCC is required to promote compliance
with the law by educating industry participants about their rights and obligations under the
Horticulture Code.
See, for example, submissions by Growcom, Tasmania Farmers and Graziers, NSW Farmers, the National
Farmers’ Federation and the Law Council of Australia.
15
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Issues Paper: Review of the Horticulture Code of Conduct
To promote compliance with the Horticulture Code, the ACCC has developed and distributed a
range of education material including:
 an overview of the Horticulture Code that summarises the Horticulture Code in plain
language
 a guide to the Horticulture Code for growers and wholesale traders in the horticulture
industry
 an educational DVD outlining the key parts of the Horticulture Code
 the Horticulture Code compliance manual—a plain language manual aimed at providing
stakeholders with guidance on how to comply with the Horticulture Code and establish an
effective compliance program
 a Horticulture Code questions and answers sheet
 a range of Horticulture Code fact sheets.
The ACCC has also created an information network for stakeholders in the horticulture industry,
to provide them with timely information about compliance with the Horticulture Code.
Additionally the Horticulture Mediation Advisor provides educational material on the code on its
website, outlining the basic requirements of the code for growers, merchants and traders, as
well as the dispute resolution process.
However, anecdotal evidence indicates that there remains a significant lack of knowledge and
understanding about the operation and requirements of the Horticulture Code among segments
of the horticulture industry. There has also been criticism from some stakeholders that the
material provided during the initial educational campaign was too focused on the legal aspects
of the operation of the code, and would have been better placed to focus on good business
practices that are Horticulture Code compliant.
The 2008 ACCC inquiry into the grocery sector recommended the implementation of further
education initiatives regarding the Horticulture Code and its dispute resolution procedures,
including the role of assessors in resolving disputes (ACCC 2008, p. 420).
This recommendation was supported by the Horticulture Code Committee, which noted that
further comprehensive industry education was essential to ensure that the Code was
implemented effectively.
Effect of technological changes on the Horticulture Code
There have been significant technological changes since the introduction of the Horticulture
Code in 2007 that may allow for greater transparency to be introduced into the horticulture
industry and enable growers to source accurate and timely information on produce prices. For
example, information on the wholesale price of fresh produce sold at the Melbourne Market is
available on a daily, weekly, monthly or quarterly basis via Fresh State’s Data Fresh services.
Additionally, horticulture produce agreements could be digitised and quickly shared between
parties.
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Issues Paper: Review of the Horticulture Code of Conduct
Part 6 issues for consideration
Should the Horticulture Code include an obligation to act in good faith? What should be the nature and
scope of that obligation?
What compliance costs, if any, would a good faith obligation impose on parties operating under the code?
Are there any comparable international laws or regulations covering the relationship between growers
and traders that could inform the Horticulture Code review?
Should the code apply to imported product and thus provide a level playing field for all traded product?
How effective is the current educational material in informing growers and traders about the Horticulture
Code?
How could the Australian Government better inform growers and traders about the Horticulture Code?
For example, what are the most effective ways to disseminate information about the code and its
operation?
How might advances in technology (increased connectivity, smartphones, digital photography etc.)
support or improve the operation of the Horticulture Code? How might it improve contracting practices,
delivery processes and dispute resolution, for example?
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Issues Paper: Review of the Horticulture Code of Conduct
7 Options for the future of the
Horticulture Code
There are a number of options available to the Australian Government following this review.
These are:
1) let the Horticulture Code lapse
2) renew the current Horticulture Code
3) renew the Horticulture Code with amendments.
Option 1: Let the Horticulture Code lapse
On 1 April 2017, the Horticulture Code is due to sunset. If the code is not remade by this time,
the code will cease to be operational. As such, an option is to let the code sunset and leave
growers and traders to trade in horticulture produce in accordance with provisions contained in
common law, general contract law and requirements under the CCA, including proposed unfair
contracts legislation if it is extended to business-to-business transactions. Requirements under
the Horticulture Code would no longer apply.
Option 2: Renew the current Horticulture Code
The Horticulture Code could be remade as it is currently written.
Anecdotal evidence suggests that education on the code could be improved. An education
campaign would be beneficial if this option were to be implemented.
Option 3: Renew the Horticulture Code with amendments
The Horticulture Code could be remade with amendments. Amendments could include those
discussed in this issues paper such as:
 introduce an obligation on growers and traders covered by the code to act in good faith
 extend the code to cover exporters, retailers and processors
 allow a method to be used when calculating price
 require produce to be rejected within 24 hours or the horticulture produce is deemed to be
accepted.
An education campaign targeted at those covered by the code would be crucial to the successful
implementation of this option.
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Issues Paper: Review of the Horticulture Code of Conduct
Part 7 issues for consideration
What option for the future of the Horticulture Code should be implemented and why? What impacts will
this have on the horticulture sector?
If Option 3 were implemented, what amendments should be made to the code and why?
What compliance costs would be incurred if these amendments were made?
Are there any other options that could be considered? If so, why and how would it achieve the objectives
of transparency and clarity in transactions in the sector?
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Issues Paper: Review of the Horticulture Code of Conduct
How to make a submission
Request for feedback and comments
Your feedback and comments are sought on the issues outlined in this paper that affect the
rights and obligations of growers and traders operating under the Trade Practices (Horticulture
Code of Conduct) Regulations 2006 (the Horticulture Code). The information contained in this
document is for discussion purposes. Attachment D provides a summary of issues for
consideration. It is aimed at facilitating a comprehensive and independent review by Mr Mark
Napper and Mr Alan Wein of the Horticulture Code and the issues outlined in the terms of
reference.
Information in this document does not represent the views of the Australian Government, its
policies or the direction of future policy. Feedback and comments received will inform
Mr Napper and Mr Wein will report to government with their findings and recommendations.
While submissions may be lodged electronically or by post, electronic lodgement is preferred.
For accessibility reasons, please email responses in a Word or RTF format. You are welcome to
submit an additional PDF attachment.
Closing date for feedback: 5pm, Friday 18 September 2015
Email: hortcode@agriculture.gov.au
Post:
Horticulture Code Review Secretariat
Food & Agricultural Policy Branch
Department of Agriculture
GPO Box 858
CANBERRA CITY ACT 2601
Confidentiality
All information (including name and address details) contained in submissions may be made
available to the public on the Department of Agriculture website or in future papers, unless you
indicate that you would like all or part of your submission to remain in confidence.
Automatically generated confidentiality statements in emails do not suffice for this purpose.
Respondents who would like part of their submission to remain confidential should provide this
information marked as such in a separate attachment, and identify the particular information to
be kept confidential and provide reasons for the confidentiality.
All submissions will be provided to the reviewers with handling instructions consistent with this
confidentiality statement.
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Issues Paper: Review of the Horticulture Code of Conduct
Intellectual property
Intellectual Property (IP) means all intellectual property rights including rights relating to
know-how, copyright, inventions and patents, trademarks, registered designs, layouts and all
other rights resulting from intellectual activity in industrial, scientific, literary or artistic fields.
Responsibility for compliance with IP laws in submissions rests with you, the author(s) of the
submission, not with the Department of Agriculture. By lodging your submission, you warrant
that you have not knowingly infringed any IP laws and that you have obtained all necessary
copyright and other IP permissions.
By lodging your submission, you grant to the Commonwealth of Australia a permanent,
irrevocable, royalty-free, world-wide, non-exclusive licence, (that is, a legal permission,
including a right of sub-licence) to use, copy, reproduce, adapt, communicate and exploit all or
any of the material contained in your submission.
Privacy
Personal information means information or an opinion about an identified individual, or an
individual who is reasonably identifiable.
The collection of personal information by the Department of Agriculture in your submission is
for the purposes of facilitating a review of the issues outlined in the terms of reference. By
making a submission, you consent to the department disclosing your personal information to Mr
Mark Napper and Mr Alan Wein, on the department’s website and to other persons or
organisations where necessary for the above purposes, provided the disclosure is consistent
with relevant laws, in particular the Privacy Act 1988 (Privacy Act). Your personal information
will be used and stored in accordance with the Australian Privacy Principles.
By making a submission you warrant that all individuals who have personal information
contained in the submission consent to the department’s handling of their personal information
as outlined above.
See our Privacy Policy web page (http://www.daff.gov.au/about/privacy) to learn more about
accessing or correcting personal information or making a complaint. Alternatively, telephone the
department on +61 2 6272 3933.
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Issues Paper: Review of the Horticulture Code of Conduct
Terms of reference
Introduction
The Horticulture Code regulates trade in horticultural produce between growers and traders of
fresh fruit and vegetables. The code also establishes a dispute resolution procedure.
The code was implemented on 14 May 2007 with the aim of improving the clarity and
transparency in transactions between horticulture growers and traders. Since this time concerns
have been raised about its overall effectiveness, especially the number of transactions occurring
outside of its coverage.
The code is due to sunset on 1 April 2017. It is therefore timely to provide both horticultural
growers and traders with the opportunity to provide feedback on how the code can be improved
to better meet the needs of Australia’s horticultural industry.
Terms of Reference
The reviewers are required to look into the efficacy of the Horticulture Code of Conduct (the
code).
The review will include, but not be limited to:
1) The extent to which the code currently applies to arrangements between growers and traders
2) The effectiveness of the code in meeting its purpose, including improving the clarity and
transparency in current arrangements between growers and traders
3) The knowledge of the code by growers and traders
4) The extent to which hybrid trading arrangements occur in the industry
5) The enforcement of the code and the function of the horticultural mediation adviser
6) Options for the future of the code, including any further measures that would improve the
operation of the code
7) Any other related issues raised in the Competition Policy Review and the draft Food and
Grocery Code of Conduct.
The reviewers are required to prepare a report to the Minister for Agriculture, the Hon. Barnaby
Joyce MP, within four months of the commencement of the review. The report is to include both
findings and recommendations, based on evidence presented to the reviewer and these terms of
reference.
The reviewers are required to release an issues paper in response to the above terms of
reference, and provide stakeholders with an opportunity for comment on the issues paper. Nonconfidential submissions will be published on the review website. In gathering evidence to
support the findings and recommendations for the final report, the reviewers are required to
undertake appropriate consultations, including with industry, traders, growers and the
Australian Competition and Consumer Commission.
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Issues Paper: Review of the Horticulture Code of Conduct
The reviewers
Mr Mark Napper has more than 30 years experience in Australian agribusiness, 22 of which have
been in horticulture. A successful producer as well as a businessman, Mr Napper owns a fruit
orchard in Bangalow NSW and currently grows peaches, nectarines and custard apples. With
over a decade of experience in CEO and Managing Director roles, Mr Napper has extensive
background in finance and corporate governance and is currently on the Board of Horticulture
Innovation Australia Limited.
Mr Alan Wein is an experienced lawyer mediator and runs a practice that specialises in
franchising, trade practices and retail leasing disputes, particularly relating to small business.
Mr Wein is a member of the Law Council of Australia SME Committee and is also a member of
the Law Institute of Victoria Alternative Dispute Resolution Committee. In January 2013,
Mr Wein was appointed by the Australian Government to review the Franchising Code of
Conduct. Mr Wein is an experienced accredited mediator for the Office of the Franchising
Mediation Adviser and the Office of the Small Business Commissioner in Victoria, having been
previously appointed the inaugural chair of the Victorian Government Small Business Advisory
Council.
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Issues Paper: Review of the Horticulture Code of Conduct
Glossary
ACCC
Australian Competition and Consumer Commission
ACL
Australian Consumer Law
CCA
Competition and Consumer Act 2010
CIE
Centre for International Economics
Food and Grocery Code
Competition and Consumer (Industry Codes – Food and Grocery)
Regulation 2015
Franchising Code
Competition and Consumer (Industry Codes—Franchising) Regulation
2014 (Franchising Code)
HMA
Horticulture Mediation Adviser
Horticulture Code
Trade Practices (Horticulture Code of Conduct) Regulations 2006
NFF
National Farmers’ Federation
PGICC
Produce and Grocery Industry Code of Conduct
RGICCC
Retail Grocery Industry Code of Conduct Committee
RIS
Regulation impact statement
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Issues Paper: Review of the Horticulture Code of Conduct
References
ABS 2015, Value of Agricultural Commodities Produced: Australia, year ended 30 June 2014, cat.
No 7503.0, Australian Bureau of Statistics, Canberra.
ABS 2007, Value of Agricultural Commodities Produced: Australia, year ended 30 June 2006, cat.
No 7503.0, Australian Bureau of Statistics, Canberra, available at
http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/7503.0.ACCC 2008, Report of the ACCC inquiry
into the competitiveness of retail prices for standard groceries, report to the Minister for
Competition Policy and Consumer Affairs, Australian Competition and Consumer Commission,
Canberra.
ACCC n.d.a, ‘Acting in good faith’, Australian Competition and Consumer Commission, Canberra,
available at accc.gov.au/business/franchising/acting-in-good-faith.
ACCC n.d.b, ‘Guidelines on the use of infringement notices’, Australian Competition and
Consumer Commission, Canberra, available at accc.gov.au/publications/guidelines-on-the-useof-infringement-notices/guidelines-on-the-use-of-infringement-notices/2-the-infringementnotice-provisions.
ACCC n.d.c, ‘Horticulture code investigations’, Australian Competition and Consumer
Commission, available at accc.gov.au/business/industry-codes/horticulture-code-ofconduct/horticulture-code-investigations.
ANRA 2014, ANRA response to Agricultural Competitiveness Green Paper, Australian National
Retailers Association submission to the Agricultural Competitiveness Green Paper.
Australian Government 2015, Agricultural Competitiveness White Paper, Canberra.
Buck, N 2003, Report of the Review of the Retail Grocery Industry Code of Conduct, report to the
Department of Industry, Tourism and Resources, Canberra.
CIE n.d., Mandatory Horticulture Code of Conduct: A Regulation Impact Statement, Centre for
International Economics, available at
comlaw.gov.au/Details/F2006L04061/Supporting%20Material/Text.
Coalition 2013, The Coalition’s Policy for Small Business, available at
http://www.liberal.org.au/our-policies.
Department of Agriculture 2015, ‘Horticulture Fact Sheet’, available at agriculture.gov.au/agfarm-food/food/publications/hort-fact-sheet.
Department of Agriculture 2014, Australian food statistics 2012–13, Canberra, available at
http://www.agriculture.gov.au/ag-farm-food/food/publications/afs.
Food and Grocery Code of Conduct Explanatory Statement 2015, Select Legislative Instrument
2015 No. 16.
Harper, I, Anderson, P, McClusky, S & O’Bryan, M 2015, Competition Policy Review: Final Report,
report to the Minister for Small Business, Canberra.
53
Issues Paper: Review of the Horticulture Code of Conduct
Horticulture Taskforce 2011, Submission to the House Standing Committee on Agriculture,
Resources, Fisheries and Forestry on the Competition and Consumer Amendment (Horticultural
Code of Conduct) Bill 2011, available at
aph.gov.au/parliamentary_business/committees/house_of_representatives_committees?url=arff
/horticultural/subs.htm.
Horticulture Code of Conduct Explanatory Statement 2006, Select Legislative Instrument 2006
No. 376.
House of Representatives 2007, House of Representatives Official Hansard: Wednesday, 28 March
2007 (No. 5, 2007)), The Parliament of the Commonwealth of Australia, Canberra.
House of Representatives: Standing Committee on Agriculture, Resources, Fisheries and
Forestry 2012, Advisory Report on the Constitutional Corporations (Farm Gate to Plate) Bill 2011
and Competition and Consumer Amendment (Horticulture Code of Conduct) Bill 2011, The
Parliament of the Commonwealth of Australia, Canberra.
IBISWorld 2015, Fruit and Vegetable Wholesaling Market Research Report April 2015, Industry
Report F3605.
PC 2014, Access to Justice Arrangements (No. 72, 5 September 2014), report to the Treasurer,
Productivity Commission, Canberra, available at
http://www.pc.gov.au/inquiries/completed/access-justice/report.
Victorian Farmers Federation 2014, submission to the consultation paper on the draft Food and
Grocery Code of Conduct, Improving Commercial Relationships in the Food and Grocery Sector,
available at
http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/Consultat
ions/2014/Improving%20Relationships%20Food%20Grocery%20Sector/Submissions/PDF/Vi
ctorian%20Farmers%20Federation.ashx.
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Issues Paper: Review of the Horticulture Code of Conduct
Attachment A Summary of the
Horticulture Code Committee views on
2008 ACCC recommendations
The Horticulture Code Committee was asked by the Australian Government to advise upon
potential implications of implementing the 2008 Australian Competition and Consumer
Commission recommendations relating to the Horticulture Code. The summary in this
attachment has been taken from the Committee’s report, Implications of the Australian
Competition and Consumer Commission recommendations to amend the Horticulture Code of
Conduct (August 2009).
Recommendation 1—to enhance the enforcement mechanisms available to the ACCC—was not
part of the Committee’s deliberations but received favourable comment from several industry
representatives.
Recommendation 2
Amend the Horticulture Code to regulate first point of sale transactions of horticulture produce
between a grower and a retailer, exporter or processor.
Potential implications if implemented
If implemented, this recommendation may have a significant impact on the retail, processing and
export sectors which has not been quantified. Economic modelling is needed to determine the
impact of this recommendation.
If implemented, the recommendation may:





reduce confusion surrounding which transactions require Code compliant agreements
pick up a very large number of small businesses which trade directly with growers
result in significant costs for exporters, processors and retailers in achieving compliance which
may have further flow-on effects for the industry
discourage retailers, exporters and processors from dealing directly with growers which will
result in growers losing direct trade links with these sectors and require them to trade through
an intermediary
result in a large number of transactions that are non-compliant if implemented without a phasein period.
Committee view
This recommendation would standardise trading relationships across the industry. In addition to
retailers, processors and exporters, this recommendation would also capture restaurants, caterers,
farmers’ markets and farm-door sales under the Code.
Including all first point of sale transactions under the Code will create additional compliance and
administration costs. However, the Committee believes these costs form part of normal business
practice and so there may be some long-term advantage in requiring this change within the industry.
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Issues Paper: Review of the Horticulture Code of Conduct
Economic modelling is needed to determine the impact of this recommendation. If implemented, this
recommendation may have a significant impact on the retail, processing and export sectors which
have not been fully quantified. The government needs to undertake further research and economic
modelling to quantify the costs of expanding the Code.
Implementing this recommendation will capture restaurants, caterers, farmers’ markets and farmdoor sales under the Code. Transactions by growers with these businesses may be of small value and
face-to-face with immediate settlement and therefore have a high degree of transparency. In these
transactions the cost of compliance may be disproportional to the benefits of compliance. The
Committee therefore suggests that this recommendation only be implemented if done so in
conjunction with recommendation 11, if recommendation 11 is amended as suggested by the
Committee.
Industry view
The majority of grower groups and wholesaler groups who made submissions to the Committee
supported the expansion of the Code to all first point of sale transactions. This was generally due to a
‘one in, all in’ philosophy.
Some retailers, processors and exporters who are not currently operating under the Code do not
support its extension. Primary concerns raised revolved around compliance costs and the inability to
continue current industry accepted business practices under the mandatory regulations.
Recommendation 3
The ACCC recommended amending the Horticulture Code to regulate first point of sale
transactions between a grower and a trader in horticulture produce, including in relation to
agreements made before 15 December 2006.
Potential implications if implemented
If implemented this recommendation may:





create a uniform system to encourage good business practices
reduce confusion as to who requires Code compliant agreements
if recommendation 3 is not implemented at the same time as recommendation 2, retailers and
processors will only be subject to the Code only when they require new contracts.
if enforced immediately, create a significant number of agreements as non-compliant
need to be accompanied by a thorough education and support program to ease the negotiation
of contracts and current resistance to working under the Code.
Committee view
The Code capturing all first point of sale transactions between a buyer and grower has the potential
to create a uniform system that encourages good business practices across all grower-buyer
relationships. However, if in implementing this amendment there is not adequate time allowed to
finalise Code compliant agreements then there would be significant negative implications.
The Committee believes that if recommendation 2 is implemented then this recommendation is
important because, if pre-existing contracts continue to be exempt from the Code, retailers,
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Issues Paper: Review of the Horticulture Code of Conduct
exporters and processors will only be subject to the Code when they require new contracts and this
might be many years away.
The Committee believes that parties to agreements made prior to 15 December 2006 should be
given a period of time to amend their contracts to be Code compliant. The Committee has not agreed
on the phase-out period, with support for periods between 12–18 months, although the majority
supported 12 months. Retailers with a large number of long-standing supply agreements would
prefer the longer period.
The Committee considers that all first point of sale transactions between a grower and trader in
horticultural produce should be Code compliant on the day 12–18 months from the date the
amended regulation is registered on the Federal Register of Legislative Instruments.
The Committee also strongly recommends that an education and training program be fully developed
and ready for implementation on the day the amended regulation is announced.
Industry view
Industry submissions have provided contradictory responses to the proposal to regulate all first
transactions under the Code. Many grower submissions disagreed with the wholesaler interpretation
of mutual support and enthusiasm for the business relationships between them. The
recommendation was generally supported by growers, however, exporters and wholesalers
considered the amendment to be unnecessary because it would take away the flexibility that longterm trading partners had established before the inception of the Code.
Recommendation 4
Amend the Horticulture Code to require a merchant to provide a grower, before delivery, with
either a price or formula for calculating price. Any agreed method used to calculate price must
be by reference to the amount received by the merchant from the sale of the produce to a thirdparty purchaser.
Potential implications if implemented:








improve market signals back to growers
provide greater flexibility operating under the Code by adding an additional price setting
mechanism in the merchant model
risk will remain with the grower rather than both parties and there would be no certainty about
when ownership transfers if safeguards are not put in place
result in a decrease in transparency and clarity of ownership transfer if safeguards are not in
place
provide for the continuation of business practices that are acceptable to both parties to the
transaction
would not be workable in the processing sector if the method is linked to the final sale price. The
value and proportion that the produce adds to the final sale of the processed goods may not be
determinable. However a method is an option only and processors could choose to agree to a
price for the produce
may effect the payment of bonuses by processors
processors may be unable to link the price for the produce to the third-party sale amount
because the value contributed by the produce to the final product may be undeterminable.
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Issues Paper: Review of the Horticulture Code of Conduct
Committee view
Mirroring the views of a significant portion of grower submissions, the Committee believes a method
with appropriate safeguards will end the situation caused by the current Code where merchants
reduce the price they offer to growers at or before delivery to manage the risk of a fluctuating
market. Allowing a pricing method will benefit growers and wholesalers by providing for accurate
market signals to growers and will provide the trader with more concise business information and
processes.
The Committee proposes that the following conditions should apply:




the point of ownership transfer must be stated in the contract
payment should be linked to the sale price
clear and transparent reporting should be provided to growers so they are able to verify the sale
price
the grower or their representative may inspect the records of the trader, including receipts of
sale, that relate to the sale of produce under the method.
Implementation of this recommendation would be necessary to successfully extend the Code to the
export sector. However, if the Code was extended, a method linked to final sale price would not
allow processors to pay bonuses to growers based on quality attributes determined after delivery.
Processors may be able to pay a bonus however, under a merchant model, in instances where the
bonus payment is contingent on circumstances occurring after a bona fide market price has been
agreed.
Appropriate safeguards will be required to prevent the return to pre-code inappropriate trading
practices. There is likely to be significant resistance to this recommendation from those growers who
are not aware of the safeguards or believe them to be inadequate.
Industry view
The majority of industry submissions supported this recommendation as it would provide greater
flexibility for operating under the Code. Grower representative groups who did not support this
recommendation were primarily concerned that use of a method was a return to a pre-code model
of transaction. The pre-code model is perceived to be a model by which traders maximise their
returns and minimise their risk by employing elements of both agency and merchant models.
Recommendation 5
Amend the Horticulture Code to require that if a merchant does not reject the produce within 24
hours of physical delivery, the produce is deemed to be accepted.
Potential implications if implemented


Produce may be delivered when the markets are closed. If the trader is unaware of the delivery
occurring the trader could be deemed to have accepted the produce without having any
knowledge of the delivery or opportunity to inspect the produce.
If produce is accepted on physical delivery it may not provide an opportunity for the trader to
conduct services on behalf of the grower to prepare the produce for resale.
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Issues Paper: Review of the Horticulture Code of Conduct

The intent of the recommendation, to ensure produce is accepted or rejected within a
reasonable time period, may resolve problems with transfer of ownership and therefore assist in
the dispute resolution process.
Committee view
The Committee considers the intent of the recommendation, which is to ensure produce is accepted
in a reasonable period of time after delivery, would be positive for the industry. However, a
prescribed period of 24 hours may not be reasonable for some produce, and does not account for
produce which is not ready for resale.
The Committee suggests that to better achieve the intent of this recommendation, where produce
has been requested by a trader, a period of acceptance should be negotiated as part of the contract,
allowing greater flexibility where 24 hours is inappropriate.
Industry view
Most wholesalers and growers submissions supported the intent of the recommendation, however,
some considered 24 hours to be an inappropriate time frame. Suggestions to achieve the intent of
the recommendation but not prescribe a time frame included:



the grower and trader agreeing to a time frame for acceptance in writing before delivery
amending the recommendation to require that only unsolicited produce be accepted or rejected
within 24 hours
amending the recommendation to only apply to produce that is ready for resale.
Concern was raised by the export sectors with rejecting produce within 24 hours because when
exporting produce, they believe they can not determine the quality of the produce until it reaches its
overseas market where transit time may be up to six weeks.
Recommendation 6
Amend the Horticulture Code to enable a merchant to deduct the cost of any services that are
required to prepare the produce for resale as part of the price amount or as part of the method
for calculating the price amount.
Potential implications if implemented
The recommendation may:





streamline process and reduce administration costs
increase transparency by detailing some of the factors merchants include in setting a price
increase flexibility in providing services, but not preclude the use of separate HPA and service
agreements
reduce competition if merchants are required to provide details of their costs in providing the
services
allow retailers to continue to conduct business practices which are already transparent,
therefore reducing the impact of the Code.
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Issues Paper: Review of the Horticulture Code of Conduct
Committee view
The Committee agrees that this recommendation may streamline the process, and reduce costs of
providing services under the Code and could be implemented with no significant implications if the
following safeguards are also implemented to protect growers from illegitimate service charges and
to protect traders from having to report commercially sensitive information about their cost
structures in providing services under the Code. These safeguards are that the Code:


must not dictate how to set the price for services, but requires the charge to be described in the
HPA and agreed to by both parties
requires reports to include itemised invoicing that details the charge for each service provided
and doesn’t require traders to provide details to growers on the accrual of business costs in
providing each service.
Industry view
There are two key points raised by industry:

there needs to be clarity and transparency regarding what services are provided and both parties
need to agree to the provision of these services within a written agreement
 implementation should not restrict the ability to provide services or require reporting of the
costs for wholesalers to provide the services. Wholesalers should provide growers with a charge
for services instead, as providing actual costs would negatively impact on competition in
providing services in the wholesale sector.
Recommendation 7
Amend the Horticulture Code to only permit an agent to recover their commission for services
performed under an agency agreement as a deduction from amounts paid by a third-party
purchaser.
Potential implications if implemented
If implemented this recommendation may:




provide incentive for agents to recover bad debts
prevent agents from ‘front-loading’ their commission on the first portion of an entire
consignment
may override common law agency
may discourage traders from acting as agents.
Committee view
On balance, the Committee believes the issue which this recommendation is intended to resolve
should be addressed through normal contractual arrangements without compromising the common
law of agency, the already limited numbers of traders willing to act as agents, or the Code.
Implementation of this recommendation could provide an incentive for agents to recover debts
which would otherwise be the responsibility of growers to recover. It may also prevent agents from
‘front-loading’ their commission on the first portion of an entire consignment.
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Issues Paper: Review of the Horticulture Code of Conduct
However, the Committee believes this recommendation would have other significant negative
implications. It would override the common law relating to agency where agents and growers can
agree any conditions they prefer on when and how the agent will be paid. A further implication
would be that the recommendation could further discourage traders from acting as agents because it
would increase the possibility of them not being paid for the work they have performed.
Industry view
Wholesaler input unanimously stated that the recommendation would contradict normal practice
and the common law of agency where the principal is charged commission for all services rendered.
Grower submissions did not address the recommendation regarding its intended effect.
Recommendation 8
Amend the Horticulture Code to exclude persons who may be an agent’s competitor from
inspecting that agent’s records on a grower’s behalf.
Potential implications if implemented
If implemented, this recommendation will maintain commercial confidentiality of agents, whilst
improving transparency and clarity of transactions.
Committee view
There is broad industry support for this recommendation and the Committee has identified no
significant negative implications arising from its implementation.
The intent of this recommendation may be achieved by allowing parties to consent to a mutually
agreeable representative or to utilise a Horticulture Assessor to inspect the agent’s books.
The Committee believe that if recommendation 4 is implemented with a requirement that a grower
can see the books of the merchant using a method, then this recommendation should be extended
to merchants.
Industry view
This recommendation was supported by wholesalers, exporters and growers in the submissions
received by the Committee.
Recommendation 9
Amend the Horticulture Code to ensure that transactions between a grower and a
cooperative/packing house, in which that grower has a significant interest, are exempted from
regulation under the Horticulture Code.
Potential implications if implemented


cooperatives and packhouses would no longer be required to have contracts with growers
introduces an exemption for wholesale transactions
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Issues Paper: Review of the Horticulture Code of Conduct



traders may pack and market produce just as packers and grower owned cooperatives do. This
recommendation would provide an exemption for a select few who utilise a business practice
which is used industry wide and would benefit from the transparency required by the Code
increases complexity of the Code by requiring cooperatives and packhouses to determine which
individual transactions require compliance
cooperatives and packhouses are currently not permitted to pool and price average under the
Code. This was an accepted business practice prior to the implementation of the Code and in the
Committee’s view is the key reason for seeking exemption. Implementing recommendations 4
and 10 would allow cooperatives and packers to pool and average so reducing arguments for
exemption.
Committee view
The Committee believes that an intention of the ACCC recommendations is that there should be
fewer exemptions and more certainty for transactions. The Committee is concerned that
implementing this recommendation would introduce an exemption with little benefit.
The Committee believes that the nature of the transaction between a grower and a
cooperative/packhouse is indistinguishable from that between a grower and a wholesaler. The
Committee therefore believes that exempting cooperatives and packhouses from the Code is
contrary to the Code’s purpose and that the Code will stronger if it regulates transactions between
growers and first point of trade such as packhouses and cooperatives.
The implication of not exempting cooperatives and packhouses from the Code is that growers would
be required to have contracts with cooperatives/packhouses. The Committee considers that given
produce is no longer in the direct control of the grower once it has been sent to the
cooperative/packhouse, growers would benefit from having formal documentation concerning the
sale of their produce.
The Committee understands that a motivation for seeking exemption for cooperatives and
packhouses from the Code is they are currently not permitted to pool and price average. This was an
accepted business practice within the industry. Implementing recommendations 4, which would
enable merchants to pool and price average and recommendation10, which would enable agents to
utilise this business practice, would effectively enable cooperatives and packhouses to conduct pool
and price averaging so this exemption becomes unnecessary.
Industry view
Grower views were divided regarding this recommendation. Some growers believe that based on the
one-in-all-in philosophy nobody should be exempt from the Code. Those that did support the
recommendation believe that transactions between a grower and their cooperative should not be
included because it is essentially an agreement with themselves.
Wholesaler groups rejected this recommendation because of their one-in-all-in philosophy and
because of the confusion it would create for wholesalers when determining which transactions
would be required to have a Code compliant agreement.
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Issues Paper: Review of the Horticulture Code of Conduct
Recommendation 10
Amend the Horticulture Code to permit agents and growers to engage in pooling and price
averaging.
Potential implications if implemented



If implemented as written this recommendation may provide a significant advantage for agents,
as merchants would not be permitted to pool and price average under the Code.
As very few traders are working as agents it might encourage more agency operations, which
grower groups identify as important.
If implemented in conjunction with the recommendation to allow use of a method to calculate
price (recommendation 4) then all traders will be able to use pooling and price averaging.
Committee view
The Committee agrees that permitting pooling and price averaging would provide a beneficial risk
management tool for the horticulture sector. The Committee believes that implementation of this
recommendation will require the following conditions to allow accurate price information to growers
and avoid market distortion:



the pooled produce must be of the same quality specifications
both parties must have prior knowledge and agree to the use of pooling and price averaging as
part of their HPA
a detailed report of sale must be provided to the grower.
If implemented as worded, this recommendation would not allow merchants or packers to pool and
price average. The Committee suggests this recommendation should be implemented in conjunction
with Recommendation 4, which allows use of a method to calculate price. Recommendation 4 will
effectively allow merchants and packers to pool and price average if agreed within the HPA. Agents
and merchants would be able to conduct business on an equal basis.
Industry View
The concept of amending the Code to allow pooling and price averaging is supported by the export,
wholesale and grower sectors as they believe it would provide more flexibility within the Code.
However, some grower organisations raised concern about extending the use of pooling and price
averaging beyond cooperatives and packhouses because of fear this business practice may be
misused in the central markets.
Recommendation 11
Amend the Horticulture Code to exempt transactions entered into in a grower shed at the central
markets from regulation under the Code, while permitting parties to these transactions to access
the Code’s dispute resolution procedure.
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Issues Paper: Review of the Horticulture Code of Conduct
Potential implications if implemented
If implemented as recommended this recommendation may lead to wholesalers migrating to the
designated area of the markets which is exempt and create loopholes for Code avoidance. Entire
wholesale markets could declare themselves as grower sheds.
Extending the recommendation to exempt small value, face-to-face transactions with immediate
settlement would capture grower sheds and exempt transactions which may not require regulatory
intervention to achieve transparency. In these transactions the cost of compliance may be
disproportional to the value of the transactions.
Committee view
The Committee believes defining exempt transactions based on a geographical area may provide a
loop-hole for Code avoidance. However, exempting small value, face-to-face transactions with
immediate settlement would achieve the intent of the ACCC recommendation by avoiding regulation
where it is not needed or where the costs of compliance would outweigh the benefits.
As discussed in recommendation 2, extending the Code to retailers would potentially capture
restaurants, small independent retailers, caterers, farmer markets and farm door sales under the
Code. Transactions with these businesses are typically of small value and face-to-face with
immediate settlement and therefore may not require mandatory regulation to achieve transparency.
In these transactions the cost of compliance may be disproportional to the benefit of compliance.
The Committee proposes that exempt transactions be those valued under $1000, and must be
conducted face-to-face, with immediate settlement. This alternative exemption defines the
transaction rather than location to achieve the intent of this recommendation. This recommendation
should be implemented in conjunction with Recommendation 2 if the Code is extended to include
retailers, processors and exporters, to avoid unnecessary regulation and compliance costs.
The Committee recommends that exempting these transactions should not preclude parties to these
transactions from the dispute resolution procedure.
Industry view
No industry representatives who commented on this recommendation supported exempting grower
shed transactions from the Code. The concern was that exempting transactions which occur in a
geographical location would lead to the migration of wholesalers to the designated area and create
loop-holes within the Code.
Recommendation 12
The ACCC also recommended that the costs incurred by the parties to a dispute under the
Horticulture Code dispute resolution procedure be subsidised by the Australian Government to
the same extent as the voluntary Produce and Grocery Industry Code of Conduct.
Potential implications if implemented

Fewer costs and barriers for parties seeking mediation under the Code.
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Issues Paper: Review of the Horticulture Code of Conduct

An increase in costs for the government.
Committee view
The Committee believes the implementation of this recommendation will result in fewer costs and
barriers in seeking mediation under the Code. Although it may result in a small cost increase for the
government, these costs are outweighed by the potential benefits of providing an accessible
mediation process for the horticulture industry and ultimately more efficient business practices.
Industry view
This recommendation was unanimously supported by industry.
Recommendation 13
The ACCC recommends the implementation of further education initiatives regarding the
Horticulture Code and its dispute resolution procedures, including the role of assessors in
resolving disputes.
Potential implications if implemented
If this recommendation:


is not implemented effectively, it may result in further confusion and fear of the Code
is implemented effectively it may improve Code compliance, reduce industry fear and confusion
of the Code and assist industry to navigate the transition to negotiating Code compliant
agreements.
Committee view
Further comprehensive industry education is essential to ensure that the Code is implemented
effectively. This is particularly important should the Code expand to cover all agreements with
exporters, processors, retailers and pre-15 December 2006 agreements. The development of an
appropriately funded, industry-driven education and training strategy focusing beyond compliance
issues to good business practices should be developed, managed and delivered by industry in
consultation with the ACCC.
Industry view
This recommendation was supported by all sectors in principle. However, all sectors were adamant
that the education package should be very different from that used when the Code was initially
introduced. A focus on good business practices that are Code compliant would achieve far more than
a strictly legal approach to the operation of the Code. It is essential to overcome the fear of
regulation and an adverse reaction to the Code based on increased compliance costs.
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Issues Paper: Review of the Horticulture Code of Conduct
Attachment B Summary of the
Horticulture Taskforce’s views on 2008
ACCC recommendations
The Horticulture Taskforce reviewed the 2008 Australian Competition and Consumer
Commission recommendations relating to the Horticulture Code. The views of the Taskforce are
summarised in this attachment.
Recommendation
Overall intent of Taskforce re
ACCC recommendations
Taskforce recommended
wording
1 Amend the Trades
Practices Act 1974 to
introduce civil pecuniary
penalties and
infringement notices in
relation to Part IVB
provisions, such as the
Horticulture Code and
introduce random record
audits as an enforcement
mechanism available
under the code.
Support
No rewording required
2 Amend the Horticulture
Code to regulate first
point of sale transactions
of horticulture produce
between a grower and a
retailer, exporter or
processor.
Support in conjunction with
recommendation 11
Amend the Horticulture Code
to regulate all first
transactions from the grower
of horticulture produce.
3 Amend the Horticulture Support with a transition period of
Code to regulate first
6 months
point of sale transactions
between a grower and a
trader in horticulture
produce, including in
relation to agreements
made before 15 December
2006.
Amend the Horticulture Code
to regulate all first
transactions from the grower
of horticulture produce,
including those transactions
made under agreements made
prior to 15 December 2006.
4 Amend the Horticulture
Code to require a
–
Do not support
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Issues Paper: Review of the Horticulture Code of Conduct
merchant to provide a
grower, before delivery,
with either a price or a
formula for calculating
price. Any agreed method
used to calculate price
must be by reference to
the amount received by
the merchant from the
sale of the produce to a
third-party purchaser.
5 Amend the Horticulture
Code to require that if a
merchant does not reject
the produce within 24
hours of physical delivery,
the produce is deemed to
be accepted.
Do not support
–
6 Amend the Horticulture
Code to enable a
merchant to deduct the
cost of any services that
are required to prepare
the produce for resale as
part of the price amount
or as part of the method
for calculating the price
amount.
Do not support
–
7 Amend the Horticulture
Code to only permit an
agent to recover their
commission for services
performed under an
agency agreement as a
deduction from amounts
paid by a third-party
purchaser.
Do not support
–
8 Amend the Horticulture
Code to exclude persons
who may be an agent’s
competitor from
inspecting that agent’s
records on a grower’s
Support
No rewording required
67
Issues Paper: Review of the Horticulture Code of Conduct
behalf.
9 Amend the Horticulture
Code to ensure that
transactions between a
grower and a
cooperative/packing
house, in which that
grower has a significant
interest, are exempt from
regulation under the
Horticulture Code.
Do not support
–
10 Amend the
Horticulture Code to
permit agents and
growers to engage in
pooling and price
averaging.
Support with safeguards
–
11 Amend the
Horticulture Code to
exempt transactions
entered into in a grower
shed at the central
markets from regulation
under the code, while
permitting parties to
these transactions to
access the code’s dispute
resolution procedure.
Do not support
Amend the Horticulture Code
to exempt transactions
conducted with immediate
settlement on collection.
12 The ACCC also
recommends that the
costs incurred by the
parties to a dispute under
the Horticulture Code
dispute resolution
procedure be subsidised
by the Australian
Government to the same
extent as the voluntary
Produce and Grocery
Industry Code of Conduct
(PGICC).
Support
–
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Issues Paper: Review of the Horticulture Code of Conduct
13 The ACCC
recommends the
implementation of further
education initiatives
regarding the
Horticulture Code and its
dispute resolution
procedures, including the
role of assessors in
resolving disputes.
Support Horticulture Code
Committee response
69
No rewording required
Issues Paper: Review of the Horticulture Code of Conduct
Attachment C Comparison of the
Food and Grocery Code and the
Horticulture Code
The table in this attachment summarises the differences between the prescribed, voluntary Food
and Grocery Code and the prescribed, mandatory Horticulture Code.
Issue
Is the code
voluntary or
mandatory?
Who does the
code cover?
Food and Grocery Code of Conduct
A voluntary industry code prescribed
under the Competition and Consumer
Act 2010.
Retailers who opt-in to the code, as
well as their suppliers.
If wholesalers sign on to the Code, only
certain provisions of the Code apply, in
particular the requirement to sign a
grocery supply agreement, act in good
faith, and dispute resolution
requirements.
What is the
purpose of the
code?
Horticulture Code of Conduct
A mandatory industry code prescribed
under the Competition and Consumer
Act 2010.
Growers and traders of fresh fruit and
vegetables who have entered into
agreements after 16 December 2006.
The code does not apply to trade in
horticulture produce between growers
and processors, exporters, or retailers.
The primary purpose of the code is to:
The purpose of the code is to:

Regulate standards of business
conduct in the grocery supply
chain to build and sustain trust and
cooperation throughout that
chain.

regulate trade in horticulture
produce between growers and
traders to ensure transparency
and clarity of transactions


Ensure transparency and certainty
in commercial transactions in the
grocery supply chain and to
minimise disputes arising from a
lack of certainty in respect of the
commercial terms agreed between
the parties.
provide a fair and equitable
dispute resolution procedure for
disputes arising under the code or
a horticulture produce agreement.

Provide an effective, fair and
equitable dispute resolution
process for raising and
investigating complaints and
resolving disputes arising between
retailers and suppliers.

Promote and support good faith in
commercial dealings between
retailers and suppliers.
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Issues Paper: Review of the Horticulture Code of Conduct
Key
requirements

Retailers or wholesalers who sign
up to the Code to have written
grocery supply agreements with
their suppliers and act in good
faith.

Certain types of conduct are
prohibited under the code unless
an exception is provided for in the
grocery supply agreement and
certain requirements are met.

Can exceptions
to the code be
made by mutual
agreement?
Promoting certainty between
retailers and suppliers on aspects
such as delisting products, funding
promotions, fresh produce
standards and quality
specifications, changes to supply
chain procedures, business
disruption, confidential
information, intellectual property
rights and allocation of shelf space.
The code identifies circumstances in
which a retailer/wholesaler and
supplier may mutually agree to vary
some provisions to allow the retailer or
wholesaler to undertake some
activities that are otherwise
prohibited.
Where such variations have occurred,
the retailer or wholesaler must
demonstrate that their actions meet
the requirements in the code in the
event of any dispute.
71

Growers and traders to use
written horticulture produce
agreements, which specify a range
of trading conditions, including
whether the trader will trade as an
agent or a merchant.

Traders to publish their preferred
‘terms of trade’. These cover
aspects such as requirements of
delivery, quality requirements,
payment and price agreements as
well as the circumstances in which
a trader may reject produce.

Agents must specify in their
agreement the basis of any
commission, fees or extra costs.
The code does not allow for traders
and growers to agree to exceptions to
any provisions of the code.
Issues Paper: Review of the Horticulture Code of Conduct
Attachment D Summary of issues for
consideration
These questions were asked throughout the issues paper to facilitate discussion on the code.
Part 2 Application of the Horticulture Code
Should the code include any exceptions – why or why not?
Should the scope of the code be expanded to include processors, retailers, and Australian based
exporters?
Are parties still operating under pre-code contracts? Why?
Have parties to pre-code contracts had a need to vary their contracts but refrained from doing
so? Why?
Should pre-code contracts be captured by the code? Why or why not? How?
Do the requirements in the code align with good business practices for trade in horticulture
produce between growers and traders? Please describe these good business practices.
Does the code meet the operational, functional and practical needs of the sector? If not, what
needs to be changed?
Do the requirements of the code prevent or limit business practices by growers and traders? If
so, what are these and how are they impacted?
Are template terms of trade useful for both growers and traders? Are they used as a basis for
horticulture produce agreements? Is there a need to develop a simple standard contract to be
used for trade in horticulture produce to be annexed to the Horticulture Code?
Do traders and growers negotiate a trader’s terms of trade before entering into a horticulture
produce agreement? Are there elements of the terms of trade that a trader is unwilling to
negotiate?
If you are a grower that has been unable to negotiate, what have you tried to negotiate, why was
the negotiation of this term important and what did you do in response to the trader not
wanting to negotiate?
Is the distinction between merchant and agent clear?
Are the different requirements for agents and merchants trading with a grower appropriate? If
not, what changes are needed?
Are the processes adequate for quick on site resolution of a problem on delivery?
Part 3 Trading arrangement in the horticulture sector
Have there been any changes to the trading environment of horticulture produce since the
Horticulture Code’s introduction that affects the operation of the code? If yes, how?
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Issues Paper: Review of the Horticulture Code of Conduct
Are ‘hybrid’ trading relationships still occurring outside of the Horticulture Code? If so, what
impact does this have?
How transparent is the horticultural supply chain today? Has the code improved transparency in
the supply chain since its introduction? If not, why? How can transparency in the sector be
further improved?
To what extent has the specialisation of wholesalers by product or commodity lines reduced the
choice of grower selling options?
What impact has the increased presence of retailers in purchasing fresh product had on the
trading of horticulture produce within Australia?
Part 4 Dispute resolution and enforcement under the
Horticulture Code
Are the dispute resolution and enforcement mechanisms under the Horticulture Code effective?
How can these be improved?
Is the Horticulture Mediation Advisor role effective? If not, how can it be improved or what
should take its place, if anything?
Could the Horticulture Code be amended to improve the utility of assessors? If yes, what
amendments could be made and why?
Are alternative dispute resolution services provided by those other than the HMA effective for
resolving disputes arising under the Horticulture Code? If so, should state-based
ombudsmen/commissioners have a greater role in enforcing the Horticulture Code?
Should the Horticulture Code include the ability to impose pecuniary penalties? If so, under what
circumstances and to what amount should pecuniary penalties be applied?
Is the fear of retaliation by a trader preventing a grower from making a complaint?
Part 5 Effectiveness of the Horticulture Code
Do the purposes of the Horticulture Code remain appropriate?
Do the requirements in the code improve transparency and clarity in the sector, as was
intended? What can be done to further improve transparency and clarity in the sector?
What has been considered by the sector to be a variation to a contract for the purposes of
bringing pre-code contracts under the code? Should more agreements be covered by the code
than is perceived?
Should the Horticulture Code be extended to cover all or some additional transactions in
horticulture produce and why? Alternatively, are there other exemptions that should be
considered?
If the code is extended to cover others in the supply chain, what amendments to code, or other
impacted codes, will be required, if any, to account for different business practices?
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Issues Paper: Review of the Horticulture Code of Conduct
Should the Horticulture Code better regulate the delivery and acceptance of produce, including
what happens where delivery and acceptance does not adhere to the horticulture produce
agreement?
Are the payment provisions of the code adequate? How can these be improved?
Does conduct prohibited by the code still occur? If yes, to what extent does it occur and what
conduct is still occurring?
What sort of behaviours should the code regulate and why?
What other issues, if any, have you experienced with the code and what are the impacts of these
issues? How might these issues be rectified and what impacts will any amendments have on the
sector, including compliance costs?
Part 6 Other matters
Should the Horticulture Code include an obligation to act in good faith? What should be the
nature and scope of that obligation?
What compliance costs, if any, would a good faith obligation impose on parties operating under
the code?
Are there any comparable international laws or regulations covering the relationship between
growers and traders that could inform the Horticulture Code review?
Should the code apply to imported product and thus provide a level playing field for all traded
product?
How effective is the current educational material in informing growers and traders about the
Horticulture Code?
How could the Australian Government better inform growers and traders about the Horticulture
Code? For example, what are the most effective ways to disseminate information about the code
and its operation?
How might advances in technology (increased connectivity, smartphones, digital photography
etc.) support or improve the operation of the Horticulture Code? How might it improve
contracting practices, delivery processes and dispute resolution, for example?
Part 7 Options for the future of the Horticulture Code
What option for the future of the Horticulture Code should be implemented and why? What
impacts will this have on the horticulture sector?
If Option 3 were implemented, what amendments should be made to the code and why?
What compliance costs would be incurred if these amendments were made?
Are there any other options that could be considered? If so, why and how would it achieve the
objectives of transparency and clarity in transactions in the sector?
74