ACCC proposes to allow collective negotiation in the NSW chicken industry

The Australian Competition and Consumer Commission has issued a draft decision proposing to allow collective negotiations between chicken growers and processors in NSW.

"The proposed authorisation* will allow the contract growers of eight chicken meat processors in NSW to collectively negotiate with their respective processors and give effect to standard growing contracts in accordance with a Code of Practice and minimum contract guidelines", ACCC Chairman, Professor Allan Fels, said today.

"The ACCC considered that while the proposed collective negotiating arrangements may reduce the scope for competition over rates of payment and other terms and conditions between growers, the nature of the arrangements and industry structure limit the anti-competitive detriment.

"To the extent that there is likely to be any detriment, the ACCC considered that it was outweighed by a number of public benefits flowing from the proposed collective arrangements and Code of Conduct. The public benefits include improving the growers' bargaining power and time and labour savings in contract negotiations in a deregulated environment. The ACCC also considered that the proposed arrangements are likely to facilitate a smoother transition to a deregulated market should the existing industry legislation not be retained.

"The industry is currently regulated by the NSW Poultry Meat Industry Act 1986. However, the ACCC notes that there is a view that these arrangements may contravene the Trade Practices Act 1974 and that there is a need for some change to the existing arrangements.

"The NSW Government recently indicated to the ACCC that it has decided not to deregulate the poultry meat industry, and is planning to introduce legislation to exempt the poultry Act from the Act. Should this occur, and depending on the nature of the exemption, any future authorisation granted by the ACCC may need to be reconsidered.

However, the NSW Government has also advised that it is still considering its response to the reports of the National Competition Policy Review of the Poultry Act. These reports have not been made available publicly. It has also advised that it is not in a position to respond substantively to the issues raised by the authorisation application.

"Regardless of any decision by the NSW Government, unless the applicants withdraw their application, the ACCC has an obligation to continue to consider the application before it according to the net public benefit test in the Trade Practices Act.

"Given that the current industry arrangements are potentially in breach of the Act, the ACCC has assessed the application against a situation where the current industry arrangements were not operating. However, the ACCC will continue to take into account the actions of the NSW Government following this draft determination being issued.

"In issuing a draft determination the ACCC is not formally granting authorisation, but rather providing the applicants and interested parties with a draft decision indicating whether or not it proposes to grant authorisation and outlining its reasons. This will give interested parties the opportunity to comment on the ACCC's views through further submissions and also at a pre-decision conference where interested parties are afforded the opportunity to meet with the ACCC face-to-face to discuss the operation and effect of the proposed decision".

The proposed authorisation would not compel any party to participate in the proposed arrangements but will provide immunity against prosecution under the TPA for the conduct covered.

The ACCC is proposing to authorise the arrangements for five years.

*The ACCC has the function, through the authorisation process, of adjudicating on certain anti-competitive practices that would otherwise breach the Trade Practices Act. Authorisation provides immunity from court action, and is granted where the ACCC is satisfied that the practice delivers offsetting public benefits. Applications for authorisation are considered on a case by case basis. The onus is on the applicant to demonstrate that there is public benefit arising from the conduct and that the public benefit outweighs any public detriment. Authorisation, once granted, does not compel parties to participate in the proposed arrangements.