SYDNEY, April 28 (Reuters) - Australia's competition regulator said on Friday it is taking legal action against Murray Goulburn Co-operative Ltd, alleging the country's largest dairy producer misled farmers over the price they would be paid for their milk.
In April 2016, Murray Goulburn cut the price they paid suppliers by 20 percent in a move that angered farmers, who said the cut came so late in the season that they had little chance but to continue producing at a loss.
After a year-long investigation, the Australian Competition and Consumer Commission (ACCC) said that Murray Goulburn never indicated to its farmer shareholders of a potential risk to prices.
"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," said Rod Sims, chairman of the ACCC in a statement.
The ACCC said it would not seek a financial penalty against the dairy processor because it would unduly harm its farmer shareholders. The regulator is, however, seeking the disqualification of former CEO Gary Helou from future directorships through court action.
Murray Goulburn said in a statement to the Australian Securities Exchange that it was considering its response to the legal action.
Helou told an Australian parliamentary inquiry in February he did not mislead shareholders. Requests for comment from Helou on Friday, via Murray Goulburn, were not responded to.
Shares in Murray Goulburn fell nearly 2 percent immediately following the ACCC announcement, eroding all daily gains enjoyed by the cooperative.
While launching action against Murray Goulburn, the ACCC cleared the world's largest dairy exporter, Fonterra Co-operative Group, following a similar complaint over the timing of cuts in milk prices in April 2016. The Australia anti-trust regulator said Fonterra was more transparent with its suppliers about potential price risks.
Reporting by Colin Packham; Editing by Stephen Coates