How collective bargaining can benefit farmers and small businesses

8 July 2016

Australian Competition and Consumer Commission Deputy Chair Michael Schaper has today launched a new guide for small businesses and farmers on the potential benefits of collective bargaining.

A collective bargaining arrangement allows two or more competing businesses to jointly negotiate with a supplier or a customer over terms, conditions, and prices. Where the ACCC is satisfied that the arrangement provides an overall public benefit, it can allow conduct which may otherwise be prohibited by the Competition and Consumer Act.

“Working together, small businesses might be able to negotiate better terms and conditions with large businesses than they could achieve on their own,” Dr Schaper said.

“Many farmers have also taken advantage of collective bargaining agreements to negotiate collectively with processors to have greater input into the terms and conditions of their contracts.”

“Potential benefits include sharing the time and cost of negotiating contracts, coordinating ordering and/or delivery, accessing new marketing opportunities from combining volume, and gaining better access to information,” Dr Schaper said.

There can also be benefits for the business the group negotiates with, such as reduced negotiation costs, more certainty of supply and savings from aligning transport and distribution.

“In the last year the ACCC has approved around 10 collective bargaining proposals in sectors such as dairy, chicken growing, hotels, and retailers of plumbing and hardware. We believe there are further opportunities for businesses to harness the benefits of collective bargaining,” Dr Schaper said.

Collective bargaining is particularly suited where members of the group have common objectives and requirements. A group of businesses may sometimes appoint a representative, such as an industry association, to act on its behalf in the negotiations.

In addition to price, collective negotiations can include aspects of delivery, volume rebates, and supply of new products.

The ACCC acknowledges that that collective bargaining will not suit everyone. It may also be difficult to get the larger business to deal with the group. Some groups may consider that an ability to threaten or engage in a collective boycott is a necessary negotiating tool.

“We recognise that in certain circumstances a collective boycott may be seen as necessary to achieve some of the efficiency benefits from collective bargaining. Each proposal is assessed on its merits,” Dr Schaper said.

“We encourage small businesses to get a copy of the guide and consider whether collective bargaining could suit their circumstances. The ACCC is able to talk to small businesses if they need more information about the options and the process for obtaining approval,” Dr Schaper said.

Without ACCC approval, businesses or individuals risk breaching the Competition and Consumer Act. The Act generally requires businesses to act independently of their competitors when making decisions about pricing, which firms they do business with, and the terms and conditions of doing business. Competitors who act collectively in these areas are at risk of breaching the competition provisions of the Act. The ACCC can approve arrangements that might breach competition law where there is an offsetting public benefit.

The guide will be widely distributed and is available at: The benefits of working with other small businesses: collective bargaining and collective boycotts

 

Release number: 
MR 121/16
ACCC Infocentre: 

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