28 Apr 2016

ACCC market study into the beef and cattle supply chain

by Mihkel Wilding, Kirsten Webb, Andrew Hay

The ACCC market study into the beef and cattle supply chain aims to discover how effective or competitive the market is.

The ACCC is calling for submissions and information in response to its recently announced market study into the beef and cattle supply chain, led by new ACCC Agriculture Commissioner, Mr Mick Keogh. Initial submissions are due by 6 May 2016 and the study is expected to conclude in November 2016, after public consultations, publication of draft findings and release of the ACCC final report.

Recent Government action in the Agricultural sector

The Government is "committed to strengthening the [agricultural] sector and ensuring it remains as competitive as possible, because stronger farmers mean a stronger Australian economy." Over the last 18 months, it has published a White Paper on Agricultural Competitiveness, conducted a Senate Inquiry into the effect of market consolidation on the red meat processing sector, allocated significant additional funding ($11.4m over four years) to the creation of a new specialist agriculture unit, created a new Agricultural Engagement and Enforcement Unit within the ACCC, and appointed a new Agricultural Commissioner to the ACCC, Mr Mick Keogh.

Agriculture is a key ACCC priority

The ACCC has identified agriculture as a key priority in 2016.

Beef production is the most common agricultural activity in Australia with approximately 57% of Australian farm carrying beef cattle, with approximately 74% of beef production exported. Since mid-2014, Australia cattle prices have risen to record levels. The beef supply chain is described by the ACCC as complex, being made up of producers, processors, exporters, retailers and consumers.

The Agriculture Unit will be dedicated to identifying fair trading and competition issues within the sector in order to enhance its competitiveness and efficiency. The ACCC has indicated that "the new Agriculture Unit will focus on investigating potential breaches of the Competition and Consumer Act and, where appropriate, taking enforcement action; increased engagement with the agriculture sector [so farmers know their rights]; and advocacy on agriculture issues, including through the use of market studies."

The establishment of the Agriculture Unit follows recent complaints within the sector about potential anti-competitive activity such as collective boycotts by processors at a cattle saleyard Victoria, which the ACCC investigated but ultimately decided not to pursue. In announcing the market study, ACCC Chairman Rod Sims noted: "The combination of issues raised through the Senate Inquiry and the ACCC’s own work has led us to undertake this market study."

The Cattle and Beef Market Study

A market study involves a long-running investigation into a sector (not a particular business or entity) pursuant to which the ACCC can use its compulsory powers to collect information and assess in its opinion whether the market structure results in an effective or competitive market outcome. The ACCC can use these powers to identify what it or other agencies can do to improve those outcomes.

On 7 April 2016, the ACCC released its Issues Paper for the market study. Broadly, the study will examine competition, efficiency and transparency in the beef and cattle supply chain in order to identify whether any behavioural or structural impediments exist which adversely affect the operation of that supply chain.

The Issues Paper contains 34 questions, split into three key issues:

  1. markets for the sale and purchase of cattle (including the operation of different sales methods and the commercial risk between participants, transparency of pricing and grading methods, geographic or transport limitations on competition and the role of livestock and buyers' agents);
  2. the processing sector (including access to value add products from abattoirs, barriers to entry and expansion in the processing markets and the availability of information regarding sale of processed meat such as margins, costs, prices and profitability of production); and
  3. markets for the sale of processed beef (export and domestic).

Some specific areas of interest include:

  • differences in bargaining strength between buyers and sellers of cattle in different purchasing situations, eg. at saleyards, in the paddock, over the hooks, forward based contracts;
  • whether there are opportunities for farmers with weak bargaining power to use co-operatives or collective bargaining arrangements;
  • the horizontal and vertical integration of processors and whether/ how this has affected competition and efficiency in the market for the acquisition of cattle;
  • whether the consolidation of saleyards has had an effect on the number and location of saleyards, and the fees charged;
  • potential collusive behaviour, for example, by meat processors boycotting auctions at saleyards;
  • the transparency of pricing levels and services levels implemented by abattoirs;
  • the effect of a seller's geographic location on access to particular sales channels;
  • the strength of competition between processors for the acquisition of cattle and the wholesale supply or processed meat;
  • the reasons why some processors are closer competitors than others eg. processing capacity, products similarities and differences, production costs, geographic proximity to abattoirs and downstream customers; and
  • margins, costs and profitability within the industry and how this has changed over time with the consolidation of the processing sector and growth of export markets.

Possible outcomes of the ACCC Market Study

The Issues Paper identifies a range of possible outcomes from the market study. These include:

  • the recommendation of measures to improve transparency and fair trade practices in the supply chain;
  • increased assistance to industry participants about their rights, obligations and options to encourage effective competition;
  • opportunities for the ACCC to make recommendations and/ or work collaboratively with the Government and industry to develop solutions to any issues identified market study;
  • further investigation by the ACCC of specific concerns that might give rise to actions under the Competition and Consumer Act 2010, for example, through the issuing of compulsory notices;
  • depending on the outcome of those investigations, ACCC enforcement action through the commencement of court proceedings.

How to get involved

The ACCC is calling for submissions and information from participants at the following levels of the supply chain:

  • producers/ farms/ farmers;
  • sellers agents acting on behalf of producers;
  • buyers agents acting on behalf of a retailer;
  • processors;
  • export and domestic customers.

Submissions can be made in writing or orally. The ACCC has also stated that it will have in place a robust confidentiality regime and accept anonymous submissions so that submissions are made candidly and without fear of retribution by stronger industry participants. The due date for initial submissions is on 6 May 2016.

The ACCC will also be conducting public forums in Queensland, New South Wales and Victoria (dates and locations to be announced in May). As has occurred with other market studies, the ACCC will also engage directly with some market participants.

The ACCC has indicated that it will publish draft findings for further comment in September. Its final report is due in November 2016.

We are available to assist you if you would like to participate during the process, or if the ACCC contacts you directly to request specific information. Please contact us if you would like to have a more detailed discussion.


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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.