The competition watchdog has launched court action against the nation's biggest milk processor Murray Goulburn and its former chief executive claiming they misled and treated farmers unfairly.
The Australian Competition and Consumer Commission on Friday announced it had begun Federal Court proceedings against Murray Goulburn.
The statement says the commission also alleges that former managing director Gary Helou and former chief financial officer Bradley Hingle were knowingly involved in the behaviour.
"The allegations relate to representations made by Murray Goulburn to its Southern Milk Region dairy farmers between June 2015 and April 2016 about the average farmgate milk price (FMP) it expected to pay them during financial year 2015/16 (FY16)," ACCC chairman Rod Sims said.
The ACCC alleges that from June 2015 until February 2016 Murray Goulburn was telling farmers to expect an opening price of $5.60 per kilogram of milk solids and that a final price of $6.05 was the mostly likely outcome for the financial year.
"That was not in fact the case," the statement says.
Then from February 2016 until April of that year Murray Goulburn had again misled farmers into thinking they would get $5.60 per kilogram of milk solids for the remainder of the season when that was not the case.
"The ACCC alleges that Murray Goulburn's conduct had an adverse impact on many farmers who, as a result of Murray Goulburn's representations regarding the farmgate milk price, had made business decisions," Mr Sims said.
"The farmers relied on Murray Goulburn's representations and were not expecting a substantial reduction in the farmgate milk price, particularly so close to the end of the season when it was not possible for them to practically readjust their expenditure."
"Many farmers are in a relatively vulnerable trading position, and rely on transparent pricing information in order to budget effectively and make informed business decisions. In these circumstances, farmers were entitled to expect Murray Goulburn to have a reasonable basis for determining its pricing, and to regularly update farmers if there was any change in forecast prices."
The ACCC is seeking orders against Murray Goulburn that include declarations, compliance program orders, corrective notices and costs but will not seek a pecuniary penalty against the company because, as a co-operative, any fine would hit the farmers who were hurt by the initial conduct.
But is will seek declarations, pecuniary penalties, disqualification orders and costs against Mr Helou and Mr Hingle.
Mr Helou resigned from the company in April 2016 amid a profit downgrade in April 2016.
Mr Helou left the top job less than a year after Murray Goulburn's partial float on the ASX, which raised $500 million from investors.
