Former Murray Goulburn Managing Director fined $200,000 over milk price claims

The Federal Court of Australia has slapped former Murray Goulburn Co-operative Managing Director Gary Helou with a $200,000 penalty for being knowingly concerned in false or misleading claims about the farmgate milk price it expected to pay dairy farmers during the 2015-16 milk season.

Murray Goulburn had previously admitted to making false or misleading representations in breach of the Australian Consumer Law (ACL) when it represented to farmers in Victoria, South Australia and southern New South Wales from early 2016 to about April 2016 that it could maintain its opening farmgate milk price (FMP) of $5.60 per kilogram of milk solid.

The ACCC alleged that, in all the circumstances, Murray Goulburn’s conduct towards farmers was unconscionable.

These circumstances included that Murray Goulburn:

• knew that farmers relied on information about the opening FMP and forecast Final FMP to make significant business decisions during the financial year;
• was aware that many farmers were unable to easily switch milk processors, particularly those contracted to Murray Goulburn;
• created an expectation that the opening FMP would be set conservatively and would be a minimum price, and that the final FMP would be higher than the opening price;
• knew that farmers expected that it would update the forecast Final FMP regularly to reflect material changes; and
• provided and maintained FMP forecasts despite knowing that these forecasts were overstated and unachievable in FY16 and that farmers were making decisions in reliance on these forecasts.

Mr Helou admitted that he was involved in the misleading representations made by Murray Goulburn. The Court found that Mr Helou contributed to Murray Goulburn’s contravention of the ACL by his failure to inform famers of risks known to Murray Goulburn and making unfounded assumptions that Murray Goulburn could achieve its targets.

As well as the $200,000 penalty, Mr Helou has also agreed to an undertaking that he will not be involved in the dairy industry for three years.

Beware!

1. The ACCC views farmers (especially) and other players in agribusiness as vulnerable parties relying heavily on what they are told.
2. Directors are personally liable for their conduct and they must not (or allow the company to) mislead anyone – the ACCC is not shy of pursuing directors directly.
3. Penalties against individuals under the ACL recently increased from $220,000 to $500,000 and this is a strong indication of the ACCC’s stance against behaviour counterproductive to the spirit of the ACL.
4. Penalties vary but are likely to be commensurate with the seniority of the director in the company. Reacting to the penalty imposed on Mr Helou, the ACCC’s Deputy Chair Mick Keogh explained: “the penalty imposed against Mr Helou reflects his seniority at Murray Goulburn and involvement in misleading representations about the farmgate milk price.”
5. As best practice and sound policy, directors should receive compulsory compliance training to learn how to navigate through common issues and help minimise the risk of breaching the ACL.
6. These penalties are serious and can be career-ending.

Macpherson Kelley has extensive technical knowledge and experience with Australian consumer and competition law, including director compliance training. For assistance in this area, please do not hesitate our Commercial team.