Chapter 3 - Problems in relations between grapegrowers and winemakers
3.1
During the inquiry the committee received evidence of
exploitative business relations between winegrape growers and winemakers, as
winemakers take advantage of their stronger bargaining power in the present
oversupply of grapes. This chapter outlines these concerns.
3.2
The evidence was provided to the committee in the
stories of individual growers and in summary comments by their representative
organisations. Growers of the Riverina and Murray
Valley regions submitted 435 form
letters of which 115 attached personal comments. A sample of these comments is
at Appendix 4. They give a clear picture of the grievances of growers. Those
grievances go beyond matters of price.
3.3
The committee also notes comments made by grower
organisations to the effect that many growers hesitate to complain for fear
that it will count against them in future dealings with wineries.[93]
3.4
The committee was not trying to collect detailed
evidence of particular cases, and has no basis for passing judgement on
individual cases or individual winemakers. There was no evidence on whether
bigger winemakers are any more exploitative than smaller ones. There was
evidence to suggest that some winemakers have very sound relationships with
growers, and others do not; and that it is not necessarily the case that ‘the
bigger the uglier’.[94] The ACCC, which
has dealt with complaints about alleged unconscionable conduct, noted that it
is not the case that any one winemaker is the focus of many complaints.[95]
3.5
Growers emphasised that their complaints about the way
business is done are quite distinct from their regret that prices are currently
low:
While some of the issues impacting on grape growers are cyclical
or caused by outside influences and may or may not be overcome through changing
conditions over the effluxion of time, the root cause of much of the current
crisis is not cyclic but rather, unsatisfactory terms and conditions by which
grapes are sold, prices are set and payments are made.[96]
Growers’ complaints
3.6
The types of concerns expressed by growers included:
-
contracts offered on a ‘take it or leave it’
basis, with no genuine negotiation;
-
contracts not being renewed, often after growers
have been encouraged by winemakers to invest in improvements;
-
prices notified late in the season, leaving
growers little chance of negotiating alternative buyers;
-
lack of objective, transparent standards for
assessing the quality of grapes; and
-
contracts are often unclear about how disputes
over price or fruit quality should be resolved.
Negotiation of contracts
3.7
Growers complained that contracts are offered, or
offered for renewal, on a ‘take it or leave it’ basis, with no real
negotiation. For example:
Whilst the majority of King
Valley growers have written contracts
in place, there is a large variation in the terms and conditions of such
contracts. In recent years some wineries have honoured their contracts while
others have either dishonoured the contract or have enforced several amendments
benefiting the winery and not the grower.[97]
As an individual, whether large or small, it is an absolute lost
cause to try and negotiate a fair and reasonable outcome for your product when
you are dealing with a large corporate entity which will say, ‘Take it or leave
it.’[98]
Contracts not being renewed contrary to reasonable expectations
3.8
Growers complained that contracts are not being renewed
as winemakers find it advantageous to rely more on the spot market. For
example, the South Australian Farmers Federation reflected this in its
concerns.[99] Mr
Joe Gropler
told the committee that:
Growers that had previously had contracts with wineries are now
being told that their contracts won’t be renewed and that they must find a new
outlet for their grapes (impossible during a glut). [100]
3.9
Of course, whatever the expectation, there is no breach
of contract if a party simply acts according to the termination clause in the
contract. There should be no expectation that a contract will run forever, if
that is not in the contract. However, when the behaviour rejects a
long-standing relationship which the grower (it is implied) took on trust, the
concern has an additional dimension:
[In 2002] the Board helped to place approximately 6,000 tonnes
of wine grapes that were ejected from wineries. Many of these growers had been
in long standing supply arrangements with wineries (some in excess of 30 years)
were simply advised immediately prior to harvest that the winery did not
require nor had the capacity to purchase their product. [101]
3.10
In addition, growers suggested that winemakers had
encouraged them to invest, with the implication that they would take the
product, but this has not been honoured:
Anecdotal evidence suggests that winery staff were providing
planting advice to producers based on their own perceptions of the market place
without any fiduciary commitment that the fruit would be purchased by the wine
company.... it is wineries that are giving growers false confidence that the wine
grapes planted will return a profitable margin once in full production.[102]
Producers encouraged vine planting, recommended specific
varieties and offered attractive contracts, then constrained acceptance of
these grapes and terminated contracts when supply exceeded their needs and/or
expectations.[103]
One example of inequity includes a number of instances where
winemakers have demanded certain developments (eg replanting to different or in
some cases the same variety, or changes in irrigation systems) to be
implemented by grape growers as a condition of the supply contract, only to
then refuse delivery. [104]
3.11
The Winemakers’ Federation denied that winemakers have
encouraged unwise investment:
In 2000 we released a document called The Marketing Decade. That document was a recognition of the rate
of plantings that had gone into the industry.... It put out some quite
significant warning bells about what would potentially happen if we were not
able to achieve the sales growth that we, as an industry, coveted. I have to
say that in hindsight it has proven to be very accurate. But we did do that,
and that is an example of how we were addressing those issues as we went
through.[105]
3.12
This comment was supported by Mr
Victor Patrick
of Fosters Wine Estates:
There were certainly a number of articles published to say that
the production growth was starting to look as though it was growing at a faster
rate than the export growth... the major companies certainly were communicating
with their grower base regularly about these sorts of themes... In a lot of
cases, our organisation made it perfectly clear that we had our future supply
in place and we did not need extra. [106]
Timing of offers and payments
3.13
Growers complained that the timing of offers has
gradually got later in the season. They implied that this has been a deliberate
tactic by winemakers to make it harder for growers to shop around for a better
offer before harvest (assuming their contract allows that). For example, King
Valley Vignerons
indicated that:
Throughout the 1990’s it was a standard business practice for
wineries purchasing grapes from our region to issue prices in mid to late
January each year. However, since 2000 the price issue date has got later and
it is now common for all wineries to issue prices in mid March... [This] means
that some growers are delivering grapes (early ripening varieties) to wineries
with no idea of the price they will receive for their product... We see no reason
why grape prices cannot be issued in December when growers undertake crop
estimations.[107]
3.14
Similarly, the Riverland Winegrape Growers Association
said:
In many cases this year, growers were picking grapes before they
had had a final offer. You cannot slow down the grapes; they are a perishable
product...[108]
3.15
Growers also expressed concern that some winemakers are
moving away from the standard three instalment payment for grapes. The Riverina
Wine Grapes Marketing Board advised that ‘Winery X’ is offering contracts with
four instalments, the last being on 15 December. The Board argued that this is
effectively ‘using growers as credit facilities’.[109] Growers thought it was particularly
oppressive for winemakers to insist on the three instalment delayed payment
even when paying extremely low prices on the spot market. It was said that the
first instalment would not even cover transport costs.
3.16
Growers also made the following claims in relation to
price setting:
-
there is no realistic negotiation on price;
-
there is no transparency about how prices are
set; and
-
there are problems with assessing the quality of
grapes.
No realistic negotiations on price
3.17
Growers complained that there are often no realistic
negotiations on price. For example, according to the Riverina Wine Grapes
Marketing Board, ‘most contracts... are supply agreements that bind the grower to
the winery for a set duration of time (years) but offer no minimum price for
the grower to have a level of financial comfort. The offer price is posted each
year at the commencement of harvest and the grower, via the supply agreement
has to deliver with no formal offer, negotiation and agreement occurring.’[110]
Under these contracts a winery could nominate an unrealistic
price, having no obligation to offer a market price. There needs to be a
mechanism that can be employed by growers that allows for negotiation to occur.
These types of contracts only serve to provide a fertile ground for litigation.[111]
3.18
Similarly Murray Valley Winegrowers indicated:
There are no formal provisions that allow for meaningful price
negotiations. And if no dispute resolution process is available, and the grower
is under contract to supply fruit, what choice is there but to ‘accept’ the
price?[112]
3.19
It was sometimes unclear whether these complaints
alleged breach of contract, or merely unfair pressure. The Riverina Wine Grapes
Marketing Board argued that ‘growers can be asked to amend the contract by
wineries, with fear that if the amendment is not entered into the grower will
not be considered “on side” with the winery in the future’:
[Winery Y] has begun the process of communicating to all
contracted producers that it wishes to amend the contract, for the next two
years to reduce the level of Chardonnay that they have agreed to purchase, by
25%. Growers are in no position to seek amendments in their favour. Growers for
the [Winery Y] feel that by not agreeing to the amended terms they may possibly
suffer ill treatment by the company in terms of the business relationship
deteriorating and possible price reductions to their wine grapes by the subjective
quality assessment process employed by the company.[113]
3.20
Similarly from the Riverland
Winegrape Growers Association:
I cannot say the example you gave of a winery saying, ‘Here is a
contract, but now we are not going to buy the grapes’ has not happened, but it
is not a common occurrence. It is more common—there are two wineries where this
has occurred very recently—for growers to receive letters from the winery
saying, ‘We are buying your grapes, but we cannot afford to pay the price that
was in the contract, so we are going to offer you something less.’ I guess the
growers in most cases feel, ‘I have no option because I don’t have any
bargaining power.’[114]
No transparency on how prices are set
3.21
A closely related matter is the lack of clarity about
how prices are set. A ‘take it or leave it’ approach to a price offer might be
more acceptable if it was clear that the offer was based on some objective,
transparent, industry accepted, procedure. It appears that this is often not
the case. For example, witnesses said:
The huge variation in prices paid by different wineries for what
is essentially the same product has left growers totally bewildered as to how
the ‘market price’ is determined.[115]
The pricing is set by the buyer and no correspondence is entered
into. The price paid is totally based on the field personnel’s assessment which
is a very subjective taste test. It is wholly exposed to abuse in the interest
of corporate profitability.[116]
...our final payments are determined by the final selling price of
the resulting wine (a market-based contract). As growers we are not privy to
any of the sale details, ie price, buyers, quality etc. We simply take their
word for it.... It seems wrong that they can give a market-based contract yet
divulge none of the details of that market.[117]
3.22
In contracts which set a price with reference to the
average price for the region, it may be unclear how this figure is reached:
If you are to arrive at a regional average that implies that you
have got to know what everyone in the region is paid. So if someone is going to
wait until everyone else is paid and then pay the average it is a bit screwy. I
guess the way it was used was considered to be fair because there would still
be consideration included in the offer, therefore making it a contract. There
would be a price. The mention of the district weighted average price would be
in the sense of saying, ‘We will pay you this price, which is our offer price,
or the district weighted average, whichever is the greater.’ So there was
reasonable opportunity there for growers to measure the risk. But, increasingly,
the opportunity for wineries to know what the district weighted average was was
blurred because they are not allowed to know what other wineries are paying and
so they cannot possibly estimate what the district weighted average is going to
be.[118]
Problems with assessing grape quality
3.23
Growers complained that assessment of grape quality is
not transparent. For example, Mr Stone
of Murray Valley Winegrowers said:
None of the equipment used is subject to third party checks, no
legal procedures are in place to protect the integrity of the results and
results are provided to growers after harvest—sometimes long after harvest—without
any means for them to be challenged. Instruments of trade in other industries have
to conform to the National Measurement Act but not as yet in the Australian
wine industry.[119]
3.24
Growers particularly claimed that assessment of colour
and flavour is erratic:
In the Riverina over the past 3 seasons there has been a major
shift toward the use of colour in red wine grapes as a determinant of price.
This has led to producers not being able to either meet the requirements to
obtain a high price or understand the basis behind these decisions, they are not
told why except for comment that this is what the consumer is seeking. The
sampling and testing processes for colour is highly variable and is not
regulated by any industry body.[120]
We still have companies that just chew and we have other
companies that just sip and that is the extent of their testing.[121]
3.25
Evidence provided in submissions also indicated that
wineries’ quality standards often change over time without apparent reason:
Within the Riverina some wineries work with producers to strive
to achieve a quality product that best suits the wine styles for their market.
Other wineries tend to approach quality in an ad-hoc manner, the case of “shifting
goal posts” annually is a constant bane to wine grape producers.[122]
Quality criteria change from season to season... which inhibits
the ability and opportunity for growers to manage vines for optimum quality.[123]
3.26
If so, this is not only a problem of fairness to
growers, but also a cause of inefficiency for the industry as a whole.
3.27
The Riverina Wine Grapes Marketing Board claimed that grapes
are often assessed by insufficiently qualified people:
The current industry standard is for winery staff members (often
seasonally employed) that may have not had any industry formally recognised
training, to make assessments of grading on growers wine grape deliveries. It
should be the case that the industry has better processes that are tangible in terms
of educational requirements for its employees that are tasked with making
financial assessments on grower’s production.[124]
3.28
The committee also received evidence that claimed that
a lack of transparent standards of assessment can lead to unscrupulous
behaviour:
This industry lacks truth and transparency.... Wineries are often
cited as having paid lower prices when the fruit has actually ended up in a
higher end use than its graded and priced value.[125]
3.29
It was argued that it is unfair that growers should pay
for the results of the winemaker’s actions - for example, when quality is
downgraded because of deterioration caused by the winemaker demanding delayed
harvest or extra transport.[126] The
same argument applies to payments based on finished wine quality, over which
the grower may have little control:
There are mistakes in the winemaking process that, I would
suggest, the growers carry at the end of the day.[127]
3.30
On the other hand, the Winemakers’ Federation argued
that payment based on finished wine quality rewards growers who produce better grapes. [128]
3.31
The South Australian Farmers’ Federation noted concerns
about:
-
apparent undue weight attributed to previous
years’ quality assessments for a particular vineyard or block;
-
grapes assessed at the quality suitable for the
current run, rather than the inherent quality of the delivered grapes; and
-
dissatisfaction ‘when the field assessment
before the harvest was good, but after the wine was processed some months
later, the quality assessment of the grapes was downgraded.’[129]
3.32
Weeks Consulting suggested that quality parameters
should be reliably measurable by ‘calibrated, reproducible and legally
recognised methods (similar to the provisions of the Weights and Measures Act)’[130]
3.33
There have been initiatives to improve the situation.
In evidence, the Winemakers’ Federation referred to Winegrape Assessment in the Vineyard and at the Winery, published
in 2003 at the initiative of the Wine Industry Relations Committee
(which has representatives of both growers and winemakers). The ACCC suggested
that this publication could be the basis of a code of conduct on assessing
quality. However Mr Byrne of the Riverland Winegrape Growers Association said, ‘we
have failed to have it implemented, because there is no compelling reason at
this time to have it implemented in such a way that it would compel parties to
comply.’[131] The Wine Industry
Relations Committee is also working on
establishing industry standards for assessing sugar and colour.
3.34
‘Flavour and character’ are particularly hard to
objectify. Winegrape Assessment in the
Vineyard and at the Winery notes that ‘in situations where grape pricing
will be influenced by flavour and character, wineries need to take particular
measures to ensure growers can have faith in the process of assessment and assignment
of these parameters...’
The special measures
wineries take could include:
- Ensuring growers appreciate product
portfolios, possibly through structured
tastings;
- Giving growers clear and realistic wine
end-use expectations with reference
to variety, region and vineyard;
- Having assessment and assignment
protocols that are specified and adhered
to with internal consistency; and
- Communication to growers of end-use
outcomes.[132]
Research on objective quality assessment
3.35
The committee notes that there has been a strong
research focus on developing better and quicker assessment of grape quality. Dr
Hardie of the Cooperative Research Centre
for Viticulture said that ‘this has been a whole of industry objective since
about 1990’:
The best example I could give you would be the measure of red
colour for wine grapes. The initial method that was introduced there was a very
time-consuming method of punching little segments or disks of skin and
extracting the colour from those over quite a lengthy period. The work of the
cooperative research centre has been to try and speed up that test through the
use of NIR spectroscopy. That has rapidly been adopted by the industry.[133]
3.36
However advances in testing colour have not removed
complaints from growers about claimed variability in the results (see paragraph
3.24 above[134]). As well, flavour is
still hard to measure:
There are hundreds of flavour compounds in the fruit and many
more are generated in the fermentation process... The technology is beyond us at
this point in time because it is so complex. There are many grape attributes
that go into determining the style of the product. We are trying to identify at
least the key ones.[135]
Comment
3.37
In the committee's view it is hardly satisfactory that
grape prices may not be settled until long after delivery, and may reflect quality
factors that cannot be described objectively and appear to be at the buyer’s
discretion. Continued research effort is essential in the attempt to make
assessment of grape quality more objective, and continued effort is needed to
encourage winemakers to adopt more objective measures. The aim should be to
have price settled at the time of delivery as far as possible, based on
criteria which are clearly known in advance.
3.38
The committee has not investigated wine industry
research and development generally and does not comment on whether the total research
effort is appropriate in proportion to the size of the industry and the
potential payoffs. That is a matter for the industry to work out with
government and the various research bodies.
3.39
The committee also notes that recommending research
priorities from the growers’ perspective would be an obvious role for a
national growers’ body.
3.40
However, the committee does not believe that more research
will solve all problems. For example, it appears there is no likelihood of
objectifying ‘flavour’ any time soon. If it suits the parties to have a payment
for something like finished wine quality, that is a matter for agreement under
contract, and there is no reason why it should be prevented. If it suits a
winemaker to impose such a condition on an unwilling grower, then we are back
to the fundamental problem of uneven bargaining power, and this is not solved
by a quality assessment standard.
Problems with dispute resolution
3.41
The difficulty of assessing grape quality objectively,
as this affects the price paid, makes it all the more important to have orderly
ways of resolving disagreements.
3.42
Contracts may or may not have dispute resolution
provisions. The Wine Industry Relations Committee’s
recommended best practice contract elements include a dispute resolution
clause. The key elements of it are:
-
prompt, written communication;
-
where the dispute is over quality or price: the
parties agree to refer the matter to an independent expert and abide by the
expert’s decision; and
-
the parties share equally the costs of the
independent expert.[136]
3.43
For example, DAFF reported that in 2004 and 2005, ‘Using
the dispute resolution process provisions in their contracts... 172 Riverland and
Sunraysia growers referred the prices [offered by McGuigan
Simeon] to an independent expert. The expert
made a binding decision that increased the price, but not to the level sought
by growers.’[137]
3.44
However, grower groups argued that dispute resolution
conditions are not used enough. In the Riverland, according to Mr
Byrne, ‘there are some wineries that are
encouraging us all the way in the work that we are doing here with standards of
contract, with dispute resolution clauses and the like. There are others who do
not have the faintest interest in going down that path with us.’ In the Murray
Valley, according to Mr Stone, ‘very few arrangements and agreements for the
sale of wine grapes... contain provisions that enable growers to involve an
independent third party should a conflict arise over price or fruit quality
assessment.’ The Riverina Wine Grapes Marketing Board said that ‘the adoption
of these industry agreed best practices has been minimal to almost non-existent
within the Riverina’:
The region’s two largest wine grape purchasers... have no adequate
consideration of dispute resolutions in terms of wine grape quality
assessments, leaving the growers with no recourse. This type of “take it or
leave it” approach in the industry is not conducive to the development of sound
business practices or sustainable industry development.[138]
3.45
The Winemakers’ Federation of Australia argued that it
is not true to say that wineries do not use dispute resolution provisions:
For example, the Hardy Wine Company has dispute resolution clauses
in all its cool area contracts, and over half of its warm inland area grape
supply. McGuigan Simeon
has clauses in all of its contracts, and these were used effectively by growers
in 2005 to dispute the price offered. Orlando Wyndham also has a dispute
resolution clause which has been used in all contracts since 2003.[139]
3.46
Murray Valley Winegrowers commented on this:
The cool areas, where, it is said, Hardy has
dispute resolution clauses in all contracts, account for less than 20% of the
company’s annual intake. In the Murray Valley NONE of the 400 growers under
contract to Hardy has the benefit of dispute resolution provisions... Apart from McGuigan
Simeon (which has announced its intention
not to renew existing contracts after 2007) and Orlando, both
of which currently have dispute resolution provisions, the other major (now
largest) grape buyer in Australia
is Southcorp, taken over recently by Foster’s. Legal advice suggests that the
dispute resolution provision in the warm-climate Southcorp contracts is
meaningless, given that it’s overtaken by a later “sole winemakers’ discretion”
clause.[140]
3.47
Growers also argued that even when contracts have
dispute resolution provisions, at a time of over-supply, growers hesitate to
use them for fear of being discriminated against at contract renewal time. [141]
3.48
The harmful interaction between lack of transparency on
price-setting, lack of reliable quality assessment, and lack of dispute
resolution procedures, is shown in the summary comment of the Wine Grape
Growers Association:
Growers are concerned that these parameters which determine the
price they will eventually receive for their produce are subjective and out of
their control and/or lack transparency. Where instruments are used to measure
quality the measuring equipment is not required to be subject to periodical,
third party checks to ensure the integrity of the process. Results are provided
to growers after the fruit has left the farm gate (often some considerable time
after harvest) without any means for them to be challenged.[142]
Comment
3.49
In the concerns summarised above it was often unclear
whether growers were alleging breach of contract or simply ‘unfair’ behaviour
under contract. In relation to price-setting and quality assessment, it was
often unclear whether growers were claiming dishonesty by wineries, or whether
they were simply dissatisfied because they do not trust the winery’s honesty
and have no way of checking it. Some submissions explicitly claimed breach of
contract or fraudulent behaviour by wineries, but there is no indication of how
widespread this is.
3.50
Either way, it is clear that there is a serious problem
of poor relations between growers and winemakers. This cannot be good for the
industry as a whole, which depends on cooperative industry development to
secure its future against growing international competition.
This industry needs to be developed in concert, wineries and
producers willingly cooperating and acting together to ensure that the consumer
is offered a quality, value for money product. Within such a relationship there
needs to be trust and accountability. This in reality is a far cry from the
majority of transactions that occur.[143]
3.51
The current oversupply of grapes has allowed
exploitative behaviour by some winemakers and given more urgency to the
problems. But the problems are underlying. It is not the case that winemakers
have more bargaining power at times of glut, but growers have more power at
times of shortage, with implication that over time things even out. Growers are
price takers, and are at risk of being exploited, at all times, because they grow
a perishable product which has no other use.
3.52
Problems such as non-transparent price-setting
procedures and subjective, changeable quality parameters should be cause for
concern regardless of whether this year’s prices are high or low.
Legal remedies
3.53
If winemakers have been breaching contracts, as
submissions occasionally claimed and sometimes implied, legal remedies should
be available. The Winemakers’ Federation, in context of arguing that a
mandatory code of conduct is unnecessary, said that ‘Australia
has a legal system that provides significant and adequate recourse to parties
that are in dispute over existing contracts (or supply arrangements).’[144]
3.54
On the other hand, growers argued that taking legal
action is expensive, stressful, and generally impractical for growers:
Contracts within the industry are not secure and are at best
only made workable by legal intervention, which is cost prohibitive for
individual producers.[145]
There is no realistic avenue for appeal or dispute resolution.
Civil litigation, with its punitive costs, clearly is not a feasible option for
growers though it is an option for, and has been used by, producers.[146]
3.55
Apart from breach of contract, it is also possible that
exploitative behaviour is ‘unconscionable conduct’ within the meaning of the Trade Practices Act 1974. This could
allow the aggrieved party to take action for damages or to seek an injunction
to stop the conduct (Trade Practices Act, s82). The ACCC may also initiate an
action.
3.56
Many submissions from growers obviously felt that the
behaviour they complained of ought to be called ‘unconscionable’. However the
ACCC stressed that in defining ‘unconscionable conduct’ within the meaning of
the Act, the bar is set high. Driving a hard bargain is not unconscionable
conduct:
The cases that the ACCC has pursued with regard to
unconscionable conduct all have an unscrupulous factor. It is more than tough
negotiating... The law will not apply to situations where a business has merely
driven a hard bargain.[147]
There is generally some sense of picking out an individual and
not being fair to that individual. So if it is an industry wide activity, if
you like—if that is the process industry-wide and it is reasonably well-known
or understood—it would be highly unlikely that that alone would be unconscionable.[148]
3.57
The ACCC has investigated complaints by winegrape
growers, but found that they fall short of unconscionable conduct. The ACCC
also commented that ‘grower complaints over the fairness of price and quality
assessments are not always completely accurate; often, other factors may be
present but unknown to growers’:
We are aware that growers typically compare the price they
receive for their fruit with the price their neighbour receives. Not
surprisingly, where there is an apparent price differential for what appears to
be identical quality fruit, growers perceive that they are not being treated
fairly or equitably.[149]
3.58
The ACCC also said in many cases growers had not
effectively used review or mediation provisions in their contracts before
approaching the ACCC. [150]
3.59
Provisions in the Trade Practices Act about ‘misuse of
market power’ apply only to ‘horizontal’ behaviour among competitors, not to relationships
between suppliers and their customers.[151]
3.60
The committee notes the discussion of unconscionable
conduct in the Senate Economics Committee’s
2004 report on the effectiveness of the Trade Practices Act in protecting small
business.[152] Relevantly, the
Economics Committee did not support banning
standard form ‘take it or leave it’ contracts, and it did not support adding an
‘unfair contracts’ provision to the present unconscionable conduct provisions.
It did support amending the Act to clarify that the presence of a ‘unilateral
variation’ contract condition is a matter that a court may have regard to in
deciding whether conduct is unconscionable - see paragraph 4.10 below.
Comment
3.61
The committee accepts that the behaviour described
above may not be ‘unconscionable conduct’ within the meaning of the Trade
Practices Act. However, it is still cause for concern.
3.62
The committee agrees with growers that it is not
realistic to suggest that the remedy to exploitative behaviour is legal action.
Legal action is expensive and stressful for individual growers. It is inhibited
by the fear that it will lead to payback in future contract negotiations. In
any case, it appears that most of the behaviour of concern probably falls short
of being breach of contract.
3.63
All the problems above arise fundamentally from the
imbalance of bargaining power. This flows through to contract conditions just
as it does to the price offered:
I guess the market at the time of signing determines the terms
by which those contracts are more favourable either for the grower or for the
winemaker. In a position where the market is very short, winemakers will agree
to terms that perhaps they will not agree to when the market is long.[153]
3.64
It could be argued that offering a contract renewal
with later dates of payment (for example) is no different ethically from
offering a price lower than last year’s. Obviously many growers do not see it
that way. They accept that prices depend fundamentally on the balance of supply
and demand, but still feel aggrieved when what they regard as oppressive
contract conditions come on top of that.
3.65
Chapter 4 considers possibilities for improving the
situation of growers.
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