Energy cartel laws waived for food firms

posted by Su-San Sit
27 November 2017

Australia’s competition regulator has allowed a group of agribusinesses to jointly buy electricity and gas across an 11-year period. 

Laws currently prohibit this type of cartel behaviour but exemptions can be granted if the benefit outweighs the detriment to the public.

The ACCC said nine businesses have joined the Eastern Energy Buyers group so far, including Australian Lamb Company, Rivalea Pig Farm and Ridley Agriproducts.

Roger Featherston, commissioner at the ACCC, said the group currently represents just 1% of Victoria’s energy consumption.

“We have given them permission to increase the size of their group to up to 10% of Victoria’s electricity and gas demand,” he said. 

“Cartel laws are very strict—if you are competing with another company and you reach an agreement to set prices or limit production, or divide up the market between yourselves, that automatically breaches the law. 

“But in this case, buyers are getting together and choosing the supplier and the price they’ll get electricity and gas from.”

Dale Smith, chief financial officer of the Australian Lamb Company, said the company’s two lamb processing plants at Sunshine and Colac had seen energy prices skyrocket. 

“With both electricity and gas, we’ve seen prices double since the beginning of 2017 and in real dollar terms that equates to almost $3m to our bottom line,” he said.

“Early indications are we should be able to save 20% but the group will now start to shop around for the best energy deal.”

He added that his company could not pass the higher power prices on to consumers at supermarkets or overseas.

Earlier this year, the ACCC authorised 27 South Australian mining, manufacturing and malting businesses to jointly buy electricity for the next decade. 

The SA group’s electricity demand equates to 16% of state demand.

However, Smith said although the ACCC waiver was good for businesses in the short term, the federal government needed to make more progress on energy policy.

“There’s a level of frustration of not knowing where we’re heading,” he said. 

“There’s still uncertainty about government energy policies into the future and we need to make assumptions five to 10 years into the future.” 

The other six Eastern Energy Buyers Group members are CSF Proteins, Diamond Valley Pork, Gathercole Group, Greenham and Sons, MC Herd and Turi Foods and Farming.

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