The Australian Competition and Consumer Commission have given Woolworths the go-ahead to source a new brand of milk directly from farmers.
According to the Australian Financial Review, the new deal was approved after dairy farmers were given regulatory clearance to collectively bargain with the supermarket giant as its agent, Milk2Market, for a three year period.
ACCC chairman Rod Sims described the collective bargaining arrangement as having significant public benefits through transaction cost savings as well as providing farmers with greater input into contractual terms.
Sims also believes that the deal will have limited impact on competition as participation from farmers is voluntary and the overall supply volume was relatively small.
Woolworths hopes that the new deal which will by-pass processers and potentially deliver better returns, will expel perceptions that they are exploiting farmers.
The new brand potentially called Farmers Own will aim be on the supermarket’s shelves within the next few months.
The timing of the new deal coincides with rival Coles’ plan to create a private label supply by sourcing directly from farmers with five to 10 year agreements.