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ACCC may deny authorisation to Cotton Shippers Association

The Australian Cotton Shippers Association may be denied authorisation by the Australian Competition and Consumer Commission (ACCC). This is due to ACCC’s efforts to change the way the industry classes cotton for contracts between growers and merchants. Jill Walker, ACCC Commissioner, in a statement said that the ACCC was not satisfied and the Cotton Shippers’ proposal and was likely to result in a public benefit that would outweigh anti-competitive detriment from the major merchants collectively refusing to contract with growers unless their cotton has been machine classed.

Cotton Shippers members represent the vast majority of merchants buying Australian cotton, most of which is exported. The current practice in Australia is for two of the five attributes that cotton is classed: colour and leaf (or trash content) to be classed visually; while the other three attributes are classed by machine. The merchants want full machine classing and seek authorisation from the ACCC to refuse to deal with growers unless this condition is met.

No proposal is in place to coordinate on the prices offered. Some growers oppose this move and are concerned that it would result in them receiving less for their cotton, while some support the full machine testing.

Dr Walker said that the ACCC does not accept Cotton Shippers’ argument that there is market failure, which justifies coordinated conduct by the merchants. Though, he says, there may be benefits in moving to full machine classing, individual merchants were free to move to a machine classing system at any time to realise the claimed benefits.

 
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