In conversation with ACCC Deputy Chair Mick Keogh 7 min read
Competition and consumer laws have the potential to touch on all aspects of agriculture – from farm to fork.
The Australian Competition and Consumer Commission (ACCC) has become increasingly active in the agriculture industry through market inquiries, codes of conduct, enforcement action and a push for the introduction of a new prohibition on unfair trading practices. But it's also positioning itself to deal with future issues. In particular, the increased adoption of data and technology through the supply chain raises practical, legal and ethical challenges as seen in other industries. On 20 May, Allens Partners Carolyn Oddie and Felicity McMahon hosted a virtual roundtable with ACCC Deputy Chair Mick Keogh to discuss current, emerging and future issues in agriculture.
Mick Keogh was appointed to the ACCC in 2016, and as Deputy Chair of the ACCC in 2018. As Deputy Chair, Mick is responsible for the oversight of the small business, franchise and agriculture units of the ACCC.
We have provided a recap of the key takeaways from the session below.
Recommendations in recent market inquiries focus on improving information transparency
Mr Keogh noted that the ACCC's key focus in the agriculture sector over the past 12 months has been finalising its market inquiries on water trading in the Murray Darling Basin and agricultural machinery, and working to implement the recommendations flowing from those reports.
In discussing the recommendations in the Murray Darling Basin final report, Mr Keogh said the ACCC's focus was on 'improving the collection and flow of information through robust information reporting and rules around announcements … we feel those elements are almost a foundation stone of an efficiently operating market. If you haven't got those, participants can't get to a point of confidence.'
A similar theme arose when discussing the recommendations in the agricultural machinery final report, where the ACCC 'saw strong arguments for a mandatory disclosure requirement regarding servicing and technical information in the post-warranty period.'
Codes of conduct increasingly used
The panel also discussed the ACCC's broader work involving codes of conduct, and noted the apparent increase in industry-specific codes, particularly in agriculture.
Codes offer a level of flexibility when compared to legislation, with established review timeframes of three to five years to modify, amend or scale back as competition issues are addressed in the market.
While appreciating the utility of codes, Mr Keogh commented that the ACCC will still carefully consider a number of factors before proceeding to implement one. In particular, the ACCC will consider 'systemic behaviour in the market, and the extent to which it is damaging the market or not resulting in fair trade. Where we see that behaviour, we then look at the extent of the harm or how significant it is.'
The ACCC's preference is to establish a prohibition on unfair trading practices
The ACCC is pushing for the introduction of a prohibition on unfair trading practices. The panellists discussed what conduct the ACCC considered would be captured by the proposed prohibition, and how this might apply in the agriculture sector.
Mr Keogh considers that an unfair trading practice prohibition would still require proof of significant harm arising from an imbalance in bargaining power, but the threshold would not be as high as unconscionability. Mr Keogh sees the proposed prohibition as complementing the unfair contract terms regime, but also going further to capture conduct that occurs outside of contracts as well. Mr Keogh stated:
'we identified a bit of a gap… whilst unconscionable conduct is at one end, courts have tended to take a fairly strong view of what constitutes unconscionability. They [the courts] require knowledge, intent and significant harm, to summarise in layman's terms. Bullying, undue coercion around contract renewal time and unwritten terms associated with supplier arrangements really aren't accommodated or prevented by the unconscionability requirements, yet they do cause economic harm, distortions in economic investment decisions and result in misallocation of investment and resources'.
Data is becoming an important aspect of competition in traditional production sectors
Mr Keogh noted that '[w]e are seeing increasing data dependence or data augmentation of businesses in a range of areas, from retail to processing to service industries. This is creating interesting challenges'.
Mr Keogh shared his views on the nature of the 'Farms of the Future', noting a wide variety of ownership models from investments by large overseas pensions funds in significant agribusinesses to smaller hobby-style farming supplemented by non-farm income. However, he saw the impact of data and digitisation as a key driver of change.
Mr Keogh said data issues could arise at multiple levels of the agriculture supply chain, including at the farm level, machine level and in supply chains. Mr Keogh noted that while at the farm level there was a general trend towards greater interoperability of data, there were still issues at the machine level. The ACCC would keep its eye on data which 'locked in' users or restricted interoperability if this substantially lessened competition.
Mr Keogh also noted that issues regarding the accumulation or aggregation of data explored in mergers outside of agriculture were also relevant in mergers of agribusiness in the future: 'We are trying to understand the impact consolidation might have in relation to competition. In particular, where you've got a dominant player acquiring another player who is much smaller in an adjacent market, or where there's potential for significant advantages to accrue from consolidation of data or the data that's available in that adjacent market. That's a real challenge...'
Blockchain is an attractive mechanism to provide stronger traceability along the supply chain
The panel agreed that provenance and credence factors are becoming more important to Australian agricultural producers as a way to compete, differentiate their products and generate higher margins.
The panel discussed how blockchain could be an attractive mechanism for businesses to ensure traceability of produce through the supply chain. This has the potential to create efficiencies, minimise perishable food waste, ensure safety and quality of produce, and provide accurate information to consumers and other market participants.
However, Mr Keogh commented that 'while blockchain certainly seems to provide good protection to validate or certify credence or provenance claims, there remains some limitations. If the standard applied at the start doesn't really reflect what most consumers think is being done or should be done, the claim remains misleading or deceptive.' It is not therefore a 'set and forget' solution.
Mr Keogh said this could be addressed by an information standard, pointing to the recent National Information Standard established under the ACL that provides a guide on when eggs can be labelled 'free-range'. This provides end consumers with confidence in claims made, but also provides legal certainty for egg producers on the standard required to avoid enforcement action or prosecution.
Sustainability and environmental considerations are present in authorisations for exemptions to the competition law, but not yet a prominent factor in a merger clearance context
The panellists closed by asking for Mr Keogh's thoughts on the ACCC's position on global initiatives to encourage cooperation on sustainability objectives in a way that complies with competition and consumer law.
Mr Keogh pointed to the ability to get authorisation from the ACCC for collective bargaining arrangements in certain contexts, and provided an example in the waste context. 'We authorise a lot of collective bargaining arrangements whereby multiple councils join together in a single tender … underlying that is sustainability. It certainly comes into that public benefit assessment in the context of competition exemptions'.
However, in Australia there are not yet any specific examples where sustainability has been a major factor in a merger decision.
This conversation with Mr Keogh has highlighted the increasing sophistication of the Australian agriculture sector, and the practical, legal and ethical challenges on the horizon.
Allens has significant experience helping businesses navigate the regulatory and commercial landscape in which agribusinesses operate to develop solutions and provide guidance in relation to domestic and foreign investment, complying with competition and consumer law obligations, implementing new finance models and developing and applying technology for precision farming or infrastructure access.
Allens extends its thanks to Mr Keogh for giving his time to appear on our roundtable and offer his insightful contributions to our discussions.