ACM: cheese producer Royal Lactalis Leerdammer must, through negotiations with dairy farmers, create a system for setting the milk price
The Netherlands Authority for Consumers and Markets (ACM) imposes an order subject to periodic penalty payments on cheese producer Royal Lactalis Leerdammer (Lactalis Leerdammer) for violating the Dutch Act regarding unfair trading practices in the agricultural and food supply chain (the Dutch Act, in Dutch: Wet oneerlijke handelspraktijken landbouw en voedselvoorzieningsketen, or Wet OHP Landbouw). Under this act, Lactalis Leerdammer cannot unilaterally change the milk price. A supplier association of dairy farmers has submitted a complaint to ACM about this practice. ACM orders Lactalis Leerdammer to change its supply agreement relating to the milk price, for example by including a transparent and objective pricing system. Lactalis Leerdammer will subsequently have to submit the amended conditions to the milk suppliers for approval so that negotiations on these conditions can still be held.
Lactalis Leerdammer each day collects milk from dairy farmers, and turns this milk into cheese. Supplier association Leerdammer Collectief (LVLC) has submitted multiple complaints to ACM about the supply agreement. LVLC is an association of dairy farmers with over 400 members, which supply their milk exclusively to Lactalis Leerdammer. One of LVLC’s claims is that Lactalis Leerdammer unilaterally changes the terms of supply by unilaterally setting the price each month. LVLC’s other complaints were dismissed by ACM.
Prohibition on unilateral changes to the milk price
Following an investigation, ACM has concluded that Lactalis Leerdammer violated the prohibition on the unilateral change to the terms of a supply agreement, which has been laid down in the Dutch Act. Each month, dairy farmers are informed by Lactalis Leerdammer what price they will get for their milk without Lactalis Leerdammer and dairy farmers having agreed in advance on how that price is actually determined. Since suppliers of Lactalis Leerdammer exclusively supply Lactalis Leerdammer, and dairy farmers are unable to decide in the short term to stop supplying milk, dairy farmers basically have no other choice than to accept this price.
ACM orders Lactalis Leerdammer to bring the supply agreement in line with the Dutch Act no later than three months after the publication of this decision. It can do so, for example, by including a transparent pricing system in the supply agreement. For suppliers, it needs to be clear in advance how prices are determined, and suppliers need to be able to verify this. If Lactalis Leerdammer fails to comply with this order, it will have to pay penalty payments of up to a total of 1,050,000 euros. If requested by Lactalis Leerdammer to do so, ACM is willing to look at the amended agreement and provide guidance.
The Dutch Act is aimed at strengthening the positions of farmers, growers, and fishermen vis-à-vis larger and more-concentrated market participants. In addition to the unilateral changes to contracts, more unfair trading practices have been included in the Act. If you as a supplier see that your buyer does not comply with the rules, please contact ACM and file a report.