The competition watchdog has launched legal action against the nation's largest milk processor Murray Goulburn, alleging it made false or misleading claims over farmgate prices.
The Australian Competition and Consumer Commission alleges between June 2015 and February 2016, Murray Goulburn misled farmers by claiming the forecast final farmgate milk price of $6.05/kgms was the most likely outcome for the financial year 2015/16, when that was not in fact the case.
The ACCC also alleges that from February 2016 until April 2016, it further misled farmers by representing it had a reasonable basis for expecting to be able to maintain its opening price of $5.60/kgms for the remainder of the season.
"The farmers relied on Murray Goulburn's representations and were not expecting a substantial reduction in the farmgate milk price, particularly so close to the end of the season when it was not possible for them to practically readjust their expenditure," ACCC chairman Rod Sims said on Friday.
The commission believes the company knew farmers relied on the information to make significant business decisions, and were unable to easily switch processors.
The ACCC is seeking declarations, compliance program orders, corrective notices and costs, but not a fine against Murray Goulburn, because as a co-operative it would impact affected farmers.
Instead, it is pursuing fines against former managing director Gary Helou and former chief financial officer Bradley Hingle, as well as declarations, disqualification orders and costs.
Mr Helou told a Senate hearing in April he didn't mislead farmers over the farmgate price, saying the company acted on the best information available at the time.
It followed his decision to walk away from Murray Goulburn last year, having pocketed $10 million during his time at its helm.
In a statement the company said it is considering the proceedings, but also noted that the ACCC has decided not to seek a pecuniary penalty against the company.
Labor's agriculture spokesman Joel Fitzgibbon said farmers still reeling from the events of 12 months ago will take little comfort in the news.
The Turnbull government missed an opportunity last year when it refused to join calls for the board to divert more money to farmers through a higher farmgate price.
"They should have been on the phone indicating that if the Murray Goulburn board did not do better by farmers, there would be action under both competition and corporate law," he said.
The watchdog also announced it is not taking action against Fonterra Australia over its farmgate milk price because it was more transparent about the risks and potential for a reduction in the farmgate price.
The commission is continuing its broader investigation into the dairy industry and will report back to Treasurer Scott Morrison in November.
A separate Senate inquiry into the issue will present its report to parliament on May 11.
