Introduction of penalties for Unfair Contract terms

New laws that will come into effect on 10 November 2023 will mean that unfair contract terms in standard form contracts will no longer be allowable and penalties for breaches of the law will apply.

Australian Grape and Wine encourages wineries to avoid unfair conduct in their dealings with growers, to check their contract terms are legal and to sign the Code of Conduct for Winegrape Purchases.  The ACCC reported in their winegrape market study of 2019 that variable price supply agreement terms could be considered unfair in certain circumstances, such as when the price set falls below fair market price and cannot be referenced to an external standard and where the agreement lacks a dispute resolution process. The Code of Conduct for Winegrape Purchases includes mechanisms to ensure that variable price agreements address each of these concerns.  It is not always cut and dry as to what constitutes an illegal term as only courts can make final decisions about whether a contract term is unfair. ACCC is able to assist businesses to understand their rights under contract law and publicises information relating to the types of terms that might be found to be unfair and to which types of contracts they apply. There are several examples on their website.  A recent consultation announcement for economy-wide prohibition on unfair trading practices could extend the scope of these penalties to all purchases.

The new legislation comes at a time where difficult market conditions are adding to the challenges facing growers. The Code Management Committee committee has raised concerns that the voluntary code has not delivered positive results for all growers for various reasons including lack of signatories. Whilst it was agreed that most signatory wineries abide by the Code, and recognise it as a legal obligation, the behaviour of non-signatory wineries is of concern and the risk of a mandatory code remains. Our Code Management Committee Chair, Peter Hayes advises that “The recent politico-marketing situation surrounding the market to China, and the difficult season in 2023 have served to promote and highlight concerns of growers regarding what is perceived as unprincipled and unfair use of market power by some winemakers, generally non-signatories of The Code.  Such behaviours do not align with industry’s broad commitment to ESG principles”.

It is important to remain aware of the fact that low prices and profits alone are features of an oversupplied market and do not necessarily indicate a market failure that would justify regulation of the market. Issues that do raise concerns relate to late payments, lack of pricing information, inappropriate exploitation of quality parameters to reject or reduce the price for fruit and unilateral decisions to close intake ahead of designated maturity being attained.   Australian Grape and Wine is committed to its role promoting fair and equitable trading practices. Practices that go against good conscience are at odds with our sector’s commitments to Environmental Social Governance.  

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