Court penalises potato wholesaler for breaching the Horticulture Code and declares unfair contract terms void

In proceedings brought by the ACCC, the Federal Court has declared that certain terms of contracts between Australia’s largest potato wholesaler, Mitolo Group Pty Ltd, and potato growers entered into between December 2016 and February 2018 were unfair contract terms and therefore void.

The Federal Court ordered that Mitolo pay a pecuniary penalty of $240,000 for contraventions of the Horticulture Code of Conduct in relation to 19 contracts entered into with potato growers, arising from Mitolo trading pursuant to contracts which did not specify the time in which the price was to be agreed with growers in writing. Mitolo was also ordered to pay the ACCC’s costs in the amount of $50,000.

The contract terms which were declared to be unfair included terms that allowed Mitolo to unilaterally determine or vary the price Mitolo paid farmers for potatoes, unilaterally vary other contractual terms, declare potatoes as “wastage” without a mechanism for proper review, and prevent farmers from selling potatoes to alternative purchasers.

The Court also declared that terms in Mitolo’s contracts preventing farmers from selling their own property unless the prospective purchaser entered into an exclusive potato farming agreement with Mitolo were unfair contract terms.

“This is the first Court imposed penalty for a contravention of the new Horticulture Code,” ACCC Deputy Chair Mick Keogh said.

“This is an important case for the ACCC as it goes to the heart of fairness issues the ACCC is seeking to address in agriculture. Since the ACCC’s Agriculture Unit was set up, a key concern raised by farmers relates to the degree of risk they carry and detriment they suffer as a result of imbalanced contracts.”

Through its industry engagement, the ACCC received complaints about Mitolo’s contracts from growers and industry bodies.

In addition to the orders made by the Court, Mitolo provided the ACCC with a court enforceable undertaking which contains a revised form of contract. Mitolo has undertaken to contract with growers on terms no less favourable than the revised contract terms, which are annexed to the undertaking.

“The new Mitolo contract terms are intended to provide potato growers with greater transparency and certainty over pricing, and allow them to sell potatoes to other parties if they are not satisfied with the price received from Mitolo,” Mr Keogh said.

“We take these matters very seriously, and the Court’s ruling confirms that both the Horticulture Code and the unfair contract terms law provide farmers with important protections against companies that seek to impose and enforce unfair terms,” Mr Keogh said.

In resolving this matter, Mitolo made admissions to the Court and made joint submissions with the ACCC in relation to the appropriate penalty to be imposed.