The Horticulture Code of Conduct (Code) was introduced in 2006 to ensure transparency and fairness in the trade of horticulture products. This article aims to offer some practical insights into what this mandatory Code means for growers and traders now drawing on the experience of recent enforcements by the Australian Competition and Consumer Commission (ACCC).
The Code clarifies the rights and responsibilities of growers and traders in respect of commercial dealings and offers a procedure for dispute resolution. It applies to the trade of unprocessed fruit, vegetables, nuts, herbs and other edible plants but does not apply to nursery products such as trees and shrubs.
Key elements of the Code include:
- a trader must publish and make publicly available a document setting out the terms on which they are prepared to trade with growers (terms of trade) and these terms must contain certain details such as payment timeframes, delivery and packing requirements, labelling requirements and insurance details
- a trader and grower may not trade unless they are parties to a Horticulture Produce Agreement (agreement) which must be consistent with the Code, in writing and signed by both parties. A 14 day cooling off period applies to agreements with a term in excess of 90 days
- an optional dispute resolution procedure is available to both growers and traders if they choose to use it. If one party elects to use the procedure, the other party must also participate in the procedure
While the ACCC has primary responsibility for monitoring and enforcing the Code, growers and traders may also take action against one or more growers or traders under the Code. They may also do so even if they have initiated, or are involved in, a dispute resolution mechanism under the Code.
Since the Code came into effect, the ACCC has successfully taken action against growers and traders for the following breaches of the Code:
- trading without agreements, or with agreements which do not comply with the Code
- failing to prepare or publish or have compliant terms;
- failing to provide growers with statements as required;
- failing to trade on an arms-length basis
- failing to agree on the price of produce
There are a number of possible penalties available for contravening the Code including damages, penalty orders, community service orders and injunctive relief. In addition, the ACCC will, in certain circumstances accept court enforceable undertakings which require a party to take certain steps to rectify the breach and usually include a number of other remedial matters.
Examples of undertakings that the ACCC has accepted in relation to breaches of the Code include:
- writing to each party with whom it has traded since the Code came into effect and notifying them of the contravention of the Code
- developing a Trade Practices Compliance Program and implementing that program for a minimum of three years
- producing a DVD with a presentation outlining the effect and operation of the Code and providing copies of it to all growers with whom the trader has traded since the Code came into effect
- publishing a corrective notice in an appropriate publication such as a national or state-based newspaper
These undertakings involve a significant amount of time and money to give effect to and can significantly impact a business. Separately, a trader or grower will need to ensure that they have adequately documented their compliance with the undertakings so as to prevent any further action by ACCC. Finally, many of these steps can be professionally embarrassing and can also create tensions within the supply relationship.
Preparing for ACCC audits
Since the start of 2011, the ACCC has had the power to conduct audits and actively monitor compliance with the Code. It can require a company to provide any information or documents that it must keep, generate or publish under the Code. The ACCC has already served over 40 audit notices pursuant to this new power and has recently accepted an undertaking from a trader as a result of breaches uncovered during such an audit.
If you are a grower or a trader, it is more important than ever before to ensure that your business adequately documents its compliance with the Code and that in the event of an audit it is able to demonstrate this compliance to the ACCC.
Tips to ensure compliance
- do not trade with a grower or trader unless both parties have signed an agreement
- develop and implement a compliance program
- ensure that your terms of trade are compliant with the Code and are publicly displayed at your business premises or on your website
- keep a record of when terms of trade are sent to growers and ask for them to sign and return an acknowledgement of receipt so that you can demonstrate that they have received it
- consider sending out a copy of your terms of trade annually. Any amendments to your terms and conditions must be immediately reflected in your terms of trade
- keep a file note recording where your terms of trade have been published and when they were last updated
- ensure that any agreement is compliant with the Code and if there are any differences in the terms of a specific agreement compared to the terms of trade; ensure these differences are clearly identified
- ensure that prior to entering into an agreement for a term of more than 90 days you receive a signed acknowledgement from the grower as to the obtaining of legal advice
- if you are involved in a dispute resolution process under the Code, make sure you document your compliance with the steps set and participate fully
- document any correspondence you send or receive in relation to your compliance. For example, make a note of the date on which you sent or received terms of trade or copies of a signed agreement
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.