The competition watchdog is calling for changes in Australia’s wine industry but the representative body for grapegrowers and winemakers says the agency simply doesn’t understand their business.
The Australian Competition and Consumer Commission has made 10 recommendations in its report on the wine grape industry released on Tuesday, including that large winemakers make payments within 30 days of grape delivery.
“We remain concerned about harmful market practices we have uncovered during the past 12 months, which stem from the bargaining power imbalance that exists between winemakers and growers,” ACCC deputy chairman Mick Keogh said.
The ACCC also warned it would soon begin investigating contract clauses it considered unfair.
“Some contract clauses we have seen, such as lengthy payment terms and unilateral rights for winemakers to vary agreements, clearly put growers at a significant disadvantage,” Mr Keogh said.
The ACCC also called for changes to how the winemakers report grape prices, recommending that major winemakers report their actual prices paid after each season rather than the current system in which winemakers announce their “indicative prices” in December.
Australian Grape and Wine chief executive Tony Battaglene said the report was “regulation for regulation’s sake” and argued the grape price reporting proposal was unworkable and unneeded.
“It’s disappointing that despite the work we’ve done with the ACCC, they’ve failed to understand the industry,” he said.
“There’s a lot of recommendations in there that don’t make sense.”
For example, Mr Battaglene said, 30-day payment terms for grapes ignored the commercial realities for winemakers.
Most wine contracts called for three payment tranches, which allowed for downgrades if the grapes were diseased, contaminated or had the wrong sugar levels, Mr Battaglene said.
Winemakers weren’t able to sell their wine within 30 days of grape delivery so some would likely have to seek financing if that was mandated, which would ultimately result in lower prices for growers, he said.
The ACCC also recommended all winemakers sign the voluntary Australian Wine Industry Code of Conduct and the code be strengthened including its process for dispute resolution.
It also called for national uniform standards for testing and measuring grape sugar levels and colour to address concerns the current standards could be manipulated.
Mr Keogh said the ACCC would take further action if little progress was made on its recommendations in the next 12 to 18 months.
“If the industry does not take this opportunity to act, we are likely to recommend introducing a mandatory code,” he said.
“This action must include, at a minimum, all large winemakers signing and complying with the strengthened voluntary industry code,” Mr Keogh said.
The ACCC said it spent a year working on its market study of the grape industry, holding two public forums and issuing an interim report in June.