Coles is being forced to payback $5.25 million to Norco farmers.
Coles is being forced to payback $5.25 million to Norco farmers.

Norco farmers welcome Coles' $5 million payout for milk

DAIRY farmers struggling through the drought will soon be getting a financial boost after supermarket giant Coles was forced to pay back $5.25 million for not passing on its price rise on milk.

The payments follow an ACCC investigation into whether Coles fully passed on to Norco a 10 cents per litre (cpl) price rise it charged consumers for Coles branded fresh milk.

Coles confirmed it will pay an additional 7 cpl for 2 litre and 3 litre Coles branded fresh milk, which amounts to around $5.25 million to Norco for milk supplied between April 1, 2019, and June 30, 2020, resolving the ACCC's investigation.

Norco chief executive Michael Hampson said the payment will go a long way for struggling farmers.

"Right now is when our farmers need help," he said.

"Dairy agriculture is very tough, we have a lot of farmers that are using 100 per cent bought in seed.

"They're running out of water, they need as much support they can get and we're very appreciative to be able to pass this money on to them.

"We will be able to pay directly to our farmers who are struggling with drought conditions."

Following the ACCC's investigation, Coles had been found to misleadingly promote they would pass on the full benefit of the 10 cpl retail price increase of its Coles branded 2 litre and 3 litre milk.

The ACCC's investigation focused on claims that when an unrelated 6.5 cpl increase commenced on April 1, 2019, Coles reduced its payments to Norco under the 10 cpl retail price increase from 10 cpl to 3.5 cpl.

"Coles allowed farmers, consumers and the Australian public to believe that its 10 cpl price rise would go straight into the pockets of dairy farmers, when the ACCC alleges this was not the case for Norco farmers," ACCC Chair Rod Sims said.

"We are pleased that Norco farmers will now receive additional money, commencing within seven days."

"We take commitments made to us very seriously. The ACCC will be keeping a very close eye on Coles to ensure they follow through on this commitment, and we are not ruling out future litigation if necessary," Mr Sims said.

Coles has committed to pay a lump sum to Norco for distribution to farmers within seven days, which represents an additional 7 cpl base milk price increase for the period between April 1, 2019, and December 1, 2019.

Coles will then also pass on the additional 7 cpl to Norco farmers for the period between December 1, 2019, and at least June 30 2020 by increasing the base milk price paid to Norco for 2 litre and 3 litre Coles branded fresh milk by 7 cpl.

The additional 7 cpl is more than the 6.5 cpl amount which the ACCC alleges was not passed through to Norco farmers.