The Australian Competition & Consumer Commission (ACCC) has called for changes to be made to some broiler growing contracts.

Following an extensive investigation, the ACCC found that some agreements between the country’s largest poultry processors and their chicken growers included terms that were unfair to the growers.

Some of the processors — which were not identified by the organization — have agreed to amend selected contract conditions.

Among the terms of concern were those allowing the processor to alter supply arrangements during the contract period, or to require the grower to make heavy capital investment at their own cost. Furthermore, some contracts included a marked imbalance in termination clauses, the ACCC found.

These conditions could lead to significant hard to the growers, according to Mick Keogh, the Commission’s Deputy Chair.

“Several processors have agreed to amend certain contract terms to address some of the ACCC’s concerns,” he said.

The changes will involve restoring a balance to notice periods of termination, as well as making clear what additional costs processors can impose on growers. Overall, the new contracts should provide growers with more certainty and transparency over the business agreements. 

What the ruling means for broiler farmers

According to the ACCC, its investigation followed the publication in 2020 of its report examining the Australian market for Perishable Agricultural Goods.

This highlighted some sectors — including poultry meat — in which contract terms were found to be unfair on small producers and farmers. As a result, ACCC said it faced challenges in investigating possible breaches in these agreements.

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“We expect all chicken meat processors to continue working with growers and grower groups until the contracts they have in place are clear and balanced,” said Keogh. “We’ll be monitoring the industry to see that it happens and will re-examine these and other contracts if unfair contract term laws are reformed.”

Earlier this year, the previous federal government introduced a bill to give more protection against unfair contract terms in Australian Consumer Law.

The country’s new Labor government is expected to support the proposed reforms to unfair contracts, reports ABC Rural.

Of the AUD3-billion (US$2.1-billion) chicken market in Australia, 70% is controlled by just two companies — Inghams and Baiada.

Among the changes previously made by the processors that provoked particular concern from ACCC were abrupt changes to grower manuals. These cover the conditions under which the birds are to be reared by the grower. A sudden change in stocking density, for example, could dramatically alter the grower’s costs of production.

The ACCC decision does not address all of the growers’ concerns, however.

Chair of the New South Wales Poultry Committee highlighted variations in growing fees and contract length between states and between processors.

As a result of the lack of transparency, 20-30% of growers have given up their businesses over the past four or five years, he told ABC Rural.

Poultry processors have not commented publicly on the ACCC decision.