Double Standards on Code Requirements

4 December 2017 –

Wholesalers in Australia’s six Central Markets are concerned with suggestions that they should not be entitled to a number of basic legal protections when conducting business transactions.

Wholesaling sector representative organisation, Fresh Markets Australia (FMA) was proactive in developing (with the assistance of its solicitors) standard format Horticulture Produce Agreement (HPA) documents immediately following the implementation of the new Horticulture Code of Conduct in April 2017.

These HPAs developed by FMA’s solicitors were designed to not only reflect the requirements of the Code but also include other terms and conditions commonly found in business agreements dealing with such matters as:

  • the supply of produce;
  • the quality and specifications of that produce;
  • the acceptance and/or rejection of that produce by the wholesaler;
  • dealing with produce returns where produce is non-complying (out of grade, defective);
  • terms of payment by the wholesaler; and
  • dispute resolution.

The HPA functions as a supply agreement between a grower and wholesaler (trader), it should be negotiated with input from both parties, and it should reflect good commercial practice.

However, some grower representative organisations believe that standard commercial practice should not apply where wholesalers are concerned, preferring that wholesalers have no right to claim a refund or credit from a grower for produce which is acquired by the wholesaler in good faith and on sold to a third party, but which is subsequently shown not to comply with the required quality specifications, is not as described by the grower, or has an inherent quality defect.

This is despite a quality assessment report done at the time the Code was first introduced which showed that a significant percentage of produce supplied by growers is outside the benchmark quality specifications for Class 1 produce, despite being supplied in packaging marked Class 1.

While the return of any produce must be within a reasonable period of time and must be both fair and justified, pressure has been applied to the wholesaling sector to remove these standard protections.

Claims have been made that FMA’s template merchant HPAs may not be consistent with the objectives of the Code.  These claims have not been clarified and little detail has been provided to justify what the actual concerns are.  This is despite ongoing requests for more information over the past 3 months or so. It appears therefore, that there is very much a double standard when it comes to the demands for contractual clarity and transparency regarding the quality of the produce.

It remains concerning that there are views being expressed that the same standard commercial terms of trade, commonly seen across any number of other industries (and, importantly, in the trading terms used by the major supermarket chains with growers) should not be available to fruit and vegetable wholesalers.