Feedback sought on collective bargaining plan for small businesses

6 June 2019

The ACCC is seeking views on its proposal to implement a class exemption that would allow small businesses to collectively negotiate with their suppliers and processors, and franchisees and fuel retailers to collectively negotiate with their franchisor or fuel wholesaler, without first having to seek ACCC approval.

Currently, groups of competitors seeking to negotiate together must first obtain formal approval from the ACCC under its ‘authorisation’ or ‘notification’ processes.

This new collective bargaining ‘class exemption’ would give qualifying businesses the ability to collectively negotiate without the risk of breaching competition law.

The proposed class exemption would apply to businesses and independent contractors which form, or are members of, a bargaining group, and each had an aggregated turnover of less than $10 million in the financial year before the bargaining group was formed.

This would cover about 98.5 per cent of Australian businesses.

In addition, all franchisees and fuel retailers governed by either the Franchising Code of Conduct or the Oil Code of Conduct would also be able to collectively negotiate with their franchisor, regardless of their aggregated turnover. 

The proposed legislative instrument and related documents have been released for consultation today.

The exemption would apply to the vast majority of Australian small businesses, and could include, for example, small businesses wanting to jointly buy electricity, or groups of farmers wanting to bargain with the companies who buy their produce.

“Collective bargaining allows businesses to share the time and cost of negotiating contracts, and potentially gives them more of a say on contract terms and conditions,” ACCC Deputy Chair Mick Keogh said.

“These arrangements can also benefit the prospective business partner, because it can result in more efficient scheduling or delivery arrangements.”

“This proposal would make it much simpler and less costly for eligible businesses or franchisees to collectively negotiate. However, the class exemption would not force anyone to join a collective bargaining group, or force a customer, supplier or franchisor to deal with the bargaining group if they did not want to,” Mr Keogh said.

The ACCC undertook preliminary consultation about a potential collective bargaining class exemption last year, receiving positive feedback.

“Now that we have reached a preliminary view about how we think the class exemption should work, and who should be eligible to use it, we are seeking feedback on the proposal,” Mr Keogh said.

The ACCC has in the past considered many applications for approval of collective bargaining arrangements, mostly from groups of primary producers or other small businesses wanting to negotiate with a larger business.

The proposed class exemption would mean most such groups would no longer need to seek approval from the ACCC.

“Businesses not covered by the proposed class exemption would still be able to lodge a notification instead, or use the existing authorisation process, which remains the most suitable process for more complex cases,” Mr Keogh said.

“Some franchisors have flagged competition law concerns as a reason not to negotiate with their franchisees as a group,” Mr Keogh said.

“This exemption would remove any legal doubt, and would ensure that all franchisees who have contracts with the same franchisor or fuel supplier could form a single collective bargaining group, with no franchisees excluded.”

More information about how the ACCC is proposing that the class exemption will work can be found at Collective bargaining class exemption. Submissions close on 3 July 2019.

Notes to editors

The ACCC can make a class exemption if it is satisfied that the conduct (for example, small business collective bargaining) is unlikely to substantially lessen competition or is likely to result in a net public benefit.

The ACCC has considered many applications for collective bargaining arrangements. It has gathered a good evidence base from these cases about the types of collective bargaining that produce public benefits and are unlikely to harm competition, and are likely to be suitable for a class exemption.

It would simply mean that the group can collectively bargain with the supplier or franchisor on a voluntary basis without needing to worry about a possible competition law breach. The other business partner would still be free to elect to continue to negotiate with each member of the group individually.

Background

From 6 November 2017, the ACCC has had the power to make ‘class exemptions’ for specific types of business conduct.

This new power is in addition the ACCC’s existing authorisation and notification processes that allow businesses to seek legal protection for arrangements that risk breaching competition law.

Collective bargaining is the first type of class exemption the ACCC is considering under this new power.

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90/19
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