28Minimum price—unilateral prospective step downs prohibited except in limited exceptional circumstances

28 Minimum price—unilateral prospective step downs prohibited except in limited exceptional circumstances

(1) The milk supply agreement: (a) must not allow for a unilateral prospective step down other than as mentioned in paragraph (b); and (b) subject to subsection 33(4), must allow the processor to unilaterally vary the agreement in exceptional circumstances to which subsection (3) applies if: (i) the variation is a unilateral prospective step down; and (ii) the requirements of subsection (4) of this section are satisfied; and (iii) the step down does not reduce a minimum price for milk supplied after the expected end of the exceptional circumstances. Meaning of unilateral prospective step down (2) A unilateral prospective step down is a unilateral variation of the milk supply agreement by the processor that reduces a minimum price for milk supplied under the agreement after the variation occurs. Exceptional circumstances (3) For the purposes of paragraph (1)(b), this subsection applies to exceptional circumstances that: (a) are temporary; and (b) involve an extraordinary event (including an emergency or change in market conditions) that: (i) occurs outside of Australia; and (ii) has a highly significant effect on supply, demand or costs in the dairy industry; and (iii) is not caused by decisions made by processors.

Note: Example 1: A foreign country unexpectedly restricts the importation of Australian dairy products.

Note: Example 2: There is a trade shock involving one of Australia’s major trading partners.

Other requirements relating to unilateral prospective step downs (4) For the purposes of subparagraph (1)(b)(ii), the following are the requirements: (a) either: (i) the processor has taken or will take all reasonable steps to prevent or limit the impact of the exceptional circumstances on the processor; or (ii) there are no such steps the processor can take; (b) because of the exceptional circumstances, the unilateral prospective step down is unavoidable; (c) no later than 30 days before the step down occurs, the processor gives the farmer and the Commission written notice of the following: (i) the step down; (ii) the exceptional circumstances; (iii) the reasonable steps (if any) the processor has taken or will take as mentioned in paragraph (a); (iv) why the step down is unavoidable; (v) the period to which the step down applies. (5) The milk supply agreement must: (a) allow the farmer to terminate the agreement, within 21 days after receiving notice of the unilateral prospective step down under paragraph (4)(c), with effect from the day the step down occurs; and (b) allow the farmer to rescind a termination under paragraph (a) before the end of those 21 days. (6) Subsection (5) does not prevent the milk supply agreement from allowing the farmer to terminate the agreement with effect earlier than the end of the 21 days mentioned in that subsection. (7) To avoid doubt, the milk supply agreement must not allow a minimum price to be further reduced as a result of the farmer rescinding a termination as mentioned in paragraph (5)(b). (8) Paragraph (4)(c) does not limit subsections 33(5) to (7) (processes for unilateral variations).