Industry associations play an important role in providing a collective voice for individual businesses within an industry. However, associations and their members (regardless of size) must be mindful of their obligations under the Competition and Consumer Act 2010 (the Act).
Association members regularly share information, discuss issues, develop standards and establish rules for best practice within their industry.
This is often legitimate commercial behaviour that benefits businesses and consumers, however, there is a risk that some actions may breach the Act’s rules against anti-competitive conduct.
Associations will often require that their members are suitably qualified and may limit membership to people who have met certain prerequisites. If an industry association imposes membership requirements, it will need to ensure that they are reasonable and not so onerous that they create a barrier to entry in that field, thereby limiting competition within the market.
Membership requirements should be clear and transparent, and applied in a consistent, unbiased and fair manner to all potential members.
Many industry bodies create rules which require members to comply with a code of conduct that is drafted and enforced by the association. For example:
- Casual Mall Licensing Code of Practice
- Code for Solar Photovoltaic Retail Businesses.
Voluntary codes of conduct can be an effective way to deliver increased protection for consumers, address systemic issues within an industry and reduce the regulatory burden for members.
While industry associations have their own sanctions, the practices of an association (including their codes) are still subject to the law. Industry associations need to have rules that are transparent, do not relate to pricing policies, and need to be careful when imposing restrictions on members or membership to avoid engaging in anti-competitive conduct.
The ACCC can provide information about developing voluntary codes, but associations should also consider seeking professional advice about possible issues arising out of the operation of their code of conduct.
Rules should not be overly restrictive or used in an attempt to restrict competition. Associations should make sure that the reasons for imposing rules and requirements for membership can be substantiated.
Industry associations often regulate advertising among members to provide consistency across the industry (e.g. through consistency of terminology). Advertising rules should be genuinely in the interest of consumers and not overly restrictive.
If advertising rules are too restrictive, they may have the effect of reducing the amount of information available to consumers.
An association also risks engaging in anti-competitive conduct if it sets advertising restrictions which are designed to limit competition among association members.
Example: an industry association imposing a requirement that members do not include prices or discounts in their advertising may lead to a lack of consumer transparency, which could result in a reduction of price competition among the association’s members.
Association members should be free to advertise prices or discounts of their own choosing and to compete fully with other members.
In certain circumstances, sharing information between industry association members may create a risk of anti-competitive conduct. Information exchanges can take place in many ways including through a contract, arrangement, understanding or concerted practice between association members. Information exchanges can create competition concerns where the exchange facilitates collusion between competitors, or reduces the uncertainty that naturally arises from competition.
The concept of a ‘concerted practice’ involves some form of co‑operation between businesses that is less than a ‘contract, arrangement or understanding’. There is only a risk of a concerted practice breaching the Act where it has the purpose, effect or likely effect of substantially lessening competition.
Although Australian courts have not yet considered this prohibition, in overseas jurisdictions, a concerted practice often involves competitors sharing commercially sensitive information. You can read more information about concerted practices in the ACCC’s guideline on concerted practices.
Anti-competitive information exchanges may occur either directly between competitors or through an intermediary such as an industry association. Industry associations that facilitate the sharing of members’ commercially sensitive information, such as pricing or volume forecasts, may risk breaching this provision (as well as the prohibition on price fixing), along with their members.
Industry associations can provide valuable support and guidance to businesses (particularly new and inexperienced operators) in relation to costs of doing business and pricing.
Where an association provides advice or guidance to its members about standard business costs — for example, about wages and entitlements arising under an enterprise agreement, award or other industrial instrument — this is unlikely to breach the Act.
Associations may also circulate aggregated wage data and even average historical pricing to members so long as individual members’ data is de-identified and the data is presented in a way that makes it clear that those prices are not ’authorised’ by the association, and that members are not required to follow them.
However, if an association provides members with recommended pricing schedules or price structures, or facilitates the sharing of members’ current or future prices, it and its members risk contravening the provisions in the Act relating to:
- price fixing
- anti-competitive contracts, arrangements or understandings
- anti-competitive concerted practices.
Price fixing is a serious criminal offence. Associations should make it clear to members that businesses must set their own prices for goods and services independently. This includes making their own allowances in their pricing for overheads and margins.
It is also sensible for industry associations to communicate specific cautions to their members that by sharing, discussing or agreeing upon prices with other members or competitors they could risk committing a serious criminal offence.
An industry association may breach the Act if it:
- provides members with recommended prices, or specific figures or percentages for profit margins and overheads which:
- facilitates price fixing among members, and/or
- substantially lessens competition by members conforming to the suggested price or formula
- applies, or attempts to apply, pressure on members to adopt certain prices or price structures
- takes action to stop members from charging or advertising below certain prices.
Associations should ensure that members understand they must then independently determine the final prices they charge for their goods or services, including margins for profits and overheads. Associations should not take unfavourable action against members for setting prices below a ‘recommended’ minimum. It’s less risky to provide members with general guidance about how they can calculate their own costs.
Collective bargaining occurs where two or more businesses come together to negotiate with a supplier or a customer about terms, conditions and/or prices. The group may choose to appoint a representative, such as an agent or industry association, to negotiate on their behalf.
There can be many benefits from negotiating as a group rather than individually. However, without ACCC approval prior to commencing negotiations, acting collectively may breach the Act.
Businesses can obtain legal protection to engage in collective bargaining where the ACCC is satisfied that the public benefits from the conduct outweigh the public detriments. The process for seeking ACCC approval is called authorisation or notification.
The ACCC has approved many collective bargaining arrangements involving industry associations seeking to improve contractual outcomes for members. You can browse our public register to see the types of applications we have considered.
Detailed information about collective bargaining authorisation and notification is available in the Small Business Collective Bargaining Guide.
The Australian Consumer Law (ACL) contains a number of rights and obligations that apply to businesses in their dealings with consumers. It is a breach of ACL provisions for members to claim they are a part of an industry association when they are not.
It is important that industry associations are aware of these obligations and how they will apply to their members’ day-to-day operations, as associations are often asked by members to provide guidance on whether their business policies and advertising meet the requirements of the ACL.
Some of the most important rules on dealings with consumers centre on: