Collective bargaining occurs when 2 or more businesses come together as a group to negotiate with a customer or a supplier (known as the target business) 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 with the target business rather than individually, including:

  • reducing and/or sharing the time and the cost of putting supply arrangements in place
  • creating more opportunities to negotiate terms of supply that better reflect the group’s needs (as compared to just signing a standard form contract)
  • gaining better access to information, for example by sharing relevant information, or sharing the costs of engaging a professional advisor
  • creating new marketing opportunities when the combined volume becomes more attractive to larger or new buyers or sellers
  • streamlining and coordinating ordering and delivery, and hence creating supply chain efficiencies.

The target business can also benefit from:

  • reduced costs due to negotiating with a single representative, or subset of the group, rather than each member separately
  • more supply certainty due to bulk ordering and savings from aligning transport and distribution
  • better access to information—more effective and efficient negotiations enable the transfer of more useful information between the parties.