Australia’s largest potato wholesaler, Mitolo, is facing legal action after being accused of entering into unfair contracts with its potato farmer suppliers.
The Australian Competition and Consumer Commission (ACCC) on Tuesday said it had started Federal Court proceedings against the South Australian-based company – the first legal action taken under the recently introduced Horticulture Code.
Mitolo, a major supplier to Woolworths and Coles, is facing allegations of unfair contract terms including signing exclusive supply contracts that allow it to vary prices unilaterally and prevent farmers from selling to other buyers.
ACCC deputy chair Mick Keogh said Mitolo’s exclusive contracts also did not specificy how and when the price of potatoes would be determined.
“These are some of the most egregious terms we have seen in agricultural contracts, and are key examples of the contracting practices in the sector that we want to address,” Mr Keogh said.
The consumer watchdog said the contracts were usually signed prior to, or during harvest, but would not determine the price until afterwards.
“We believe that these terms have caused, or could cause, significant detriment to farmers, by passing a heavy burden of risk down to farmers, the most vulnerable player in the supply chain,” Mr Keogh said.
The ACCC said they received complaints from farmers and industry associations.
Mitolo is alleged to breached the new Horticulture Code, which was introduced in 2017 and became mandatory from April 1.
The old industry code was reviewed after an ACCC investigation into fair trading in the horticulture industry raised concerns, including that farmers were worried about retribution if they complained about retailers and wholesalers.
The new code introduced tougher penalties and increased requirements for clarity in industry contracts.
Mitolo have been contacted for comment.