ACCC Proposes Collective Bargaining Class Exemptions For Small Businesses

Tuesday 25 June 2019 @ 10.56 a.m. | Legal Research | Trade & Commerce

The Australian Competition and Consumer Commission (‘the ACCC’) is currently seeking feedback on its proposal to implement a class exemption for collective bargaining for certain businesses.

Part IV of the Competition and Consumer Act 2010 (CTH) (‘the Act’) contains provisions relating to restrictive trade practices, including sections which specifically protect and enhance competition in the market, and so restrict collective bargaining in the Australian market. However, section 95AA of the Act provides the ACCC with the power to determine class exemptions for specific types of business conduct, where it is satisfied that all circumstances are unlikely to substantially lessen competition or are likely to result in an overall public benefit.

A class exemption provides that one or more provisions of Part IV of the Act do not apply in the specified circumstances. It therefore allows businesses to engage in specific conduct without breaching the relevant provisions of the Act. Currently, competitors that wish to group together for negotiation purposes must obtain formal approval from the ACCC under its authorisation and/or notification processes, which is determined on a case-by-case basis.

Once a class exemption is in place, relevant businesses will be able to assess for themselves whether their conduct falls under the exemption. If so, they will be able to proceed without going through authorisation or notification processes of the ACCC.

Class exemptions have a maximum validity period of 10 years, and once in place will be displayed on the ACCC website and the Federal Register of Legislation.

The proposed class exemption and all related documents were released 6 June 2019.

Proposed Class Exemptions

The new class exemption seeks to allow collective bargaining for the following groups:

  • Small businesses with their customers and suppliers
  • Franchisees with their franchisors
  • Fuel retailers with the fuel wholesaler

The class exemption focuses on collective bargaining, in which competing businesses jointly negotiate with either customers or suppliers over common issues such as terms, conditions, and prices. Ordinarily, businesses are only allowed to do this through the ACCC’s authorisation and notification processes under the Act. The proposed class exemption will provide ‘safe harbour’ for eligible businesses to do collective bargaining without going through these processes.

Mick Keogh, ACCC Deputy Chair commented in a media release:

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

Businesses that fall outside of the eligibility criteria will still need to go through the ACCC’s processes to seek legal exemption on a case-by-case basis.

The ACCC elaborated in its media release:

“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.”

Franchisees and fuel retailers, on the other hand, will be able to collectively negotiate with their franchisor, regardless of aggregated turnover. This, however, will only apply for those governed by either the ACCC’s Franchising Code of Conduct or the Oil Code of Conduct.

Businesses that form a collective bargaining group that wish to fall under the protection of the class exemption must also provide the ACCC with notice. The ACCC must be informed of when the bargaining group is formed, the terms and conditions that the group wishes to bargain about and who the target business the group proposes to collectively bargain with. Details of when the group and their representatives will first approach the target business is also required.

The ACCC also clarified in its draft guidance note that this class exemption does not cover collective boycotts. This is where businesses jointly opt to refuse to supply or buy from a particular customer or supplier, unless or until their demands are met.

The ACCC is currently seeking feedback on the eligibility criteria currently set for the class exemption, the required notice for eligibility and clarity of the guidance note. Consultation on the proposed class exemption and its related documents are currently open.

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