Former Murray Goulburn MD hit with $200k fine

6 December 2018,

Former Murray Goulburn MD hit with $200k fine

A former Murray Goulburn executive has been fined $200,000 over his involvement in the dairy group's false or misleading claims about the fixed pricing system used to forecast expected farmer payments in 2015-16. 

The Federal Court approved a settlement between Murray Goulburn and the Australian Competition and Consumer Commission (ACCC), which resulted in the fine for former managing director Gary Helou.

Murray Goulburn admitted to making false or misleading representations in breach of the Australian Consumer Law when it told farmers in Victoria, South Australia and southern New South Wales, between February 2016 and April 2016, that it could maintain paying its opening milk price of $5.60 per kilogram.

After promising to raise that price, Murray Goulburn suddenly and retrospectively slashed milk prices it paid to farmers, leaving many of them hundreds of thousands of dollars in debt.

"Murray Goulburn's misrepresentations meant farmers were not informed of the likelihood the final milk price would fall below the opening price. This was important information for farmers as it would have influenced the business decisions each farmer made," ACCC Deputy Chair Mick Keogh says.

"The penalty imposed against Mr Helou reflects his seniority at Murray Goulburn and involvement in misleading representations about the farmgate milk price."

The farmgate milk price (FMP) was a weighted average price that Murray Goulburn paid to dairy farmers from whom it acquired milk. It was stated as a dollar amount per kilogram of milk solids.

"Farmers were denied the opportunity to plan for the impact of the reduced milk price on their businesses between February and April 2016, including implementing measures to reduce their exposure to a decrease in the milk price or shopping their milk around to other dairy processors," Keogh says.

ACCC chased Helou and CFO, not Murray Goulburn

Helou admitted he was involved in the misleading representations made by Murray Goulburn. This included not informing farmers of risks known to Murray Goulburn and making unfounded assumptions that Murray Goulburn could achieve its milk powder sachet sales targets.

The ACCC says it did not seek a penalty against Murray Goulburn because as it was a co-operative, any penalty imposed against it could end up being paid by the very farmers that were misled.

"We were conscious not to seek penalty orders that would adversely affect farmers for the wrongs committed by Murray Goulburn, so we focused on obtaining appropriate orders against the individuals involved in the conduct," Keogh says.

As part of the resolution of the proceedings in the Federal Court, Helou has undertaken to the Court that he will not be involved in the dairy industry for three years.

In August 2018, the ACCC resolved its proceedings against Murray Goulburn's former Chief Financial Officer, Mr Bradley Hingle, after he consented to an order that he pay a contribution to the ACCC's costs and gave an undertaking to the court that he wouldn't be involved in the dairy industry for three years.

Murray Goulburn and Helou were also order to pay a portion of the ACCC's legal costs.

Earlier this year, Canadian dairy company Saputo completed a $1.3 billion takeover of Murray Goulburn's brands and assets.

After the sale, the former co-op was left with $195 million to fight legal battles, including two class actions and the ACCC proceedings.

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