On 3 June 2021 the Australian Competition & Consumer Commission (ACCC) announced a class exemption under which small businesses, franchisees and fuel retailers will be able to use the ACCC’s class exemption for collective bargaining. This class exemption is an important development for small businesses, franchisees and fuel retailers because it allows for otherwise unlawful conduct without needing to first obtain ACCC authorisation, which can be time consuming.
Collective bargaining occurs where two or more competitors come together as a group to negotiate with a supplier or customer about common issues such as terms, conditions and/or prices. By collectively bargaining, businesses can reduce or share the time and cost of negotiating contracts, and have more negotiating power. Counterparties also benefit because they do not have to negotiate with each business individually.
The ACCC has, since November 2017, the power to make a class exemption if it is satisfied that the conduct which may otherwise risk breaching the Competition and Consumer Act 2010 (Cth) (in this case small business collective bargaining) is unlikely to substantially lessen competition or is likely to result in a net public benefit. The ACCC also has existing authorisation and notification processes that allow businesses to seek legal protection for arrangements or other conduct that risks breaching competition law.
The new class exemption for collective bargaining for small businesses, franchisees and fuel retailers is the first made by the ACCC and is an important development as it will allow collective negotiation without first having to seek ACCC approval. Previously such businesses would have required an ACCC authorisation or notification to avoid the risk of breaching competition laws. Exemptions were only granted on a case-by-case basis.
According to the ACCC Guidelines on the collective bargaining class exemption issued during June 2021, the arrangement:
The exemption process is quick, easy and free of charge. Businesses must complete a one-page collective bargaining class exemption notice form and provide it to the ACCC when the group is formed and to each target business when the group seeks to negotiate with the target business.
Once the notice is lodged, each business in the group that meets the eligibility criteria gets immediate, automatic protection under the competition law when collectively bargaining as part of the group within the terms of the class exemption. It will therefore not be necessary for small businesses to obtain an authorisation or notification from the ACCC. Completed notices will be published on the public register page.
The class exemption will provide legal protection to eligible businesses who have lodged their one-page notice form until 30 June 2030. The ACCC will conduct a review of the arrangement in 2029 and decide whether to extend the class exemption.
The class exemption does not require anyone to join a collective bargaining group, or require a customer, supplier or franchisor to deal with the bargaining group if they do not wish to do so. The target business will be free to continue to negotiate with each member of the group individually. It simply allows a group to collectively bargain with a supplier or franchisor on a voluntary basis without potentially breaching competition law.
Businesses that already had legal protection under an authorisation or notification before the class exemption was introduced, will remain protected under that existing authorisation or notification until the authorisation or notification expires. Upon expiry, the business can consider whether to rely on the class exemption or seek re-authorisation of or re-notify their arrangements. Businesses can also use the class exemption without waiting for their existing authorisation or notification to expire, but must lodge the one-page notice form with the ACCC.
Businesses that fall outside the ambit of the class exemption will still be able to use the ACCC’s authorisation and notification processes to seek legal protection to collectively bargain on a case-by-case basis.
The class exemption for collective bargaining for small businesses is an important development for those businesses that meet the eligibility criteria, given that:
Due to the turnover requirement in respect of small businesses and independent contractors (not franchisees or fuel retailers), some small businesses may not meet the eligibility requirements for the class exemption to apply to them. These businesses will likely be at a commercial disadvantage because of this development given that:
If you have any questions in relation to this article, or require advice tailored to your situation, please do not hesitate to contact us to discuss.