Overview

Ontario marketing boards and Section 12 representative associations established under the Farm Products Marketing Act (FPMA) and the Milk Act (MA) have been given the authority to collect mandatory fees from producers of the regulated products. By regulation, licence fees (as well as money from service charges and other money payable to a board) must be used for paying the expenses of the board or association, carrying out and enforcing the relevant Act and underlying regulations, and carrying out the purposes of the board's marketing plan.

The restrictions provided by the regulatory framework on board's expenditures are very broad and general. Boards and Section 12 associations are accountable to both their producers and the Ontario Farm Products Marketing Commission (commission) for the expenditure of board funds. In that light, these guidelines are intended to provide direction to:

  • marketing board directors when they make decisions on how to spend producer funds
  • producers when they consider their expectations of their boards
  • the commission and its staff when they review the operations of boards

The guidelines provided in this document are not intended to restrict a board or Section 12's delegated authorities.

Investments made by a board or Section 12 are also considered expenditures. This document provides information on the regulatory restrictions on investments.

Regulatory context

The rights of marketing boards to collect and spend money are derived from regulations. Boards are created under marketing plans which are approved by Cabinet. The commission gives boards various powers and authorities which form the basis for an industry's marketing system.

Although each marketing regulation is unique, the commission has given boards the ability to obtain funds through a combination of license fees, producer levies, service charges or penalties.

The commission also authorizes each board to "use any class of license fees, service charges and other money payable to it, for the purposes of paying the expenses of the local board, carrying out and enforcing this Act and the regulations and carrying out the purposes of the plan under which the board is established." (from Section 7(1) 20, FPMA), see also Sections 7(1) 21 and 7(1) 22, MA). The purpose of each marketing plan is to provide for the control and regulation of the producing and marketing of one or more farm products.

Some boards have also been given the authority to establish funds (Section 7(1) 22, FPMA and Section 7(1) 23, MA). As well, the commission has given each board the power to "stimulate, increase and improve the marketing of farm products by such means as it considers proper" (Section 3(1)(h), FPMA; see also Section 3(2)(g), MA).

Marketing boards have a clear authority to pay expenses related to the administration of their regulated marketing systems, the enforcement of their regulations and the promotion of their regulated product(s). Some boards also have the authority to purchase and sell regulated products. Other expenditures are often less clear, and so a set of general and specific guidelines have been developed to assist in these decisions.

Guidelines

In general, board directors should keep in mind that these funds are generated through mandatory contributions by producers. Directors need to ensure all expenditures will stimulate, increase or improve the marketing of the regulated product(s) and should be prepared to defend the expenditures on these grounds.

Guidelines for involvement in related industries

Marketing boards may not use producer funds to invest in related businesses. If producers (separate from the board) wish to enter the processing business or purchase an input supplier, they have the option of forming a co-operative or company to do so. There may be extenuating circumstances where a marketing board has been delegated the authority to spend producer funds to process the regulated product to remove surplus product from the market.

Marketing boards should avoid competing with existing businesses, particularly if these businesses are in some way regulated by the board.

Guidelines for research expenditures

Expenditures on basic or applied agricultural, product development or market research related to the regulated product(s) and processed versions of the regulated product(s) may be justified on the basis that results may "stimulate, increase and improve" the marketing of the regulated product. This includes research into management and production practices for the regulated product.

Boards may receive royalties resulting from research they have funded.

When sharing the results of non-proprietary research, marketing boards should not give a competitive advantage to one customer if it will disadvantage another. If a board has a policy of funding proprietary research, it should ensure that all its customers have an opportunity to present proposals to access board funds for proprietary research.

Guidelines for lobbying/funding other organizations

Hiring/paying lobbyists or staff to promote a specific goal that is intended to "stimulate, increase and improve" the marketing of the regulated product is an appropriate use of producer funds.

Direct funding of political parties or governments by boards is not appropriate.

Purchasing memberships in organizations which promote goals which could "stimulate, increase and improve" the producing or marketing of the regulated product or which provide the marketing board services or information which help it to do so, is an appropriate use of producer funds.

Donating money to other organizations may be done if the board can clearly demonstrate that the recipient will facilitate or improve the producing or marketing of the regulated product(s). In other situations, where there is a strong will among members to help a particular cause or organization, boards may wish to assist in coordinating individual producers' voluntary contributions.

Donating food or promotional material is a justifiable public relations expense, but boards are encouraged to ensure these donations do not distort markets.

Guidelines for quota expenditures

Marketing boards of supply-managed industries should not purchase, sell or lease quota to or from Ontario producers. The only exceptions to this rule are:

  • buying and selling small volumes of quota to balance a quota exchange
  • acting as an agent for producers if quota becomes available from another province (any board transaction should be revenue neutral)

Regulatory restrictions on board investments

Boards may invest in financial vehicles such as:

  • investment certificates of banks including foreign banks authorized under the Bank Act to operate in Canada
  • paid up shares of credit unions or the Ontario Co-operative Credit Society
  • investment certificates of trust companies
  • debentures of loan corporations
  • bonds or debentures guaranteed by the federal or provincial government, a municipal corporation, or the government of the U.K.

For a detailed listing of investments that are permissible, please refer to Section 16 of Regulation 400 under the FPMA, and Section 13 of O. Regulation 209/99 under the MA as amended by O. Regulation 618/99 and O. Regulation 616/99. In addition, boards under the FPMA may lend money to funds established under the Farm Products Payment Act (Section 16(2), Regulation 400, FPPA).