A SENATE inquiry into the dairy industry confirmed the need to stop Murray Goulburn's proposed takeover of Warrnambool Cheese and Butter, WCB chairman Frank Davis says.
The Senate economics committee last week expressed concern about market power in the industry and called for tougher competition laws, including a temporary halt to mergers and takeovers.
Mr Davis said the findings backed the preliminary view of the Australian Competition and Consumer Commission last month that the Murray Goulburn takeover would harm competition in regional markets and lead to big price cuts for dairy farmers.
"We've always held the view that the takeover would see the end of Warrnambool Cheese and Butter's operations in the southwest, which would be a severe competitive blow to the region," Mr Davis told The Weekly Times.
"And most other industry players I talk to also believe that."
It was essential the industry retained smaller players who bought and processed milk, such as WCB and Bega Cheese, to provide a competitive "edge" in the market, Mr Davis said. "Otherwise we'll just end up with Murray Goulburn and Fonterra."
The ACCC will hand down its final decision on the takeover early next month.
In its report last week, the Senate inquiry said there was evidence farmers were getting dudded through the supply chain with little or no protection from competition laws.
"Large players are allowed to dictate terms to the weaker parties in the chain (that is, the dairy farmers)," it said. "What has been identified should, in the eyes of the committee, be of concern to all Australians."
Evidence to the inquiry suggested farmgate milk prices were now set by competition between processors in dairy regions rather than world prices.
"While it is hard to find precise data, it is evident that the retailers are making far more profit from the sale of drinking milk than are the farmers," the report says.
The report calls for stronger protection in trade practices laws against predatory pricing, creeping acquisitions and misuse of market power.
It says the ACCC should monitor pricing practices and determine how the retail milk price is split between farmers, processors and retailers.
The ACCC should also investigate the impact of generic brands on farmers and processors, as well as Australia's food security.
It says national competition policy should be reviewed by the Productivity Commission, with a halt to further dairy takeovers and mergers until this was completed.
There should also be a requirement for milk contracts with dairy farmers to include a clear pricing formula with mandatory cooling-off periods.
Furthermore, collective bargaining should be strengthened, with different groups allowed to merge and the ACCC told to appoint a mediator where necessary.
