ACCC issues class exemption for collective bargaining for small businesses

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.

What is Collective Bargaining?

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. 

What has the Class Exemption changed?

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. 

Who will benefit from this Class Exemption?

According to the ACCC Guidelines on the collective bargaining class exemption issued during June 2021, the arrangement:

  • applies to businesses and independent contractors who form, or are members of, a bargaining group, and who each had a turnover of less than $10 million in the financial year before the bargaining group was formed. It allows these businesses or independent contractors to collectively bargain with customers and suppliers about the supply or acquisition of goods or services;
  • allows franchisees who have franchise agreements with the same franchisor to collectively bargain with their franchisor regardless of their size or other characteristics; and
  • allows fuel retailers who have fuel re-selling agreements with the same fuel wholesaler, and operate under the same system or marketing plan determined, controlled or suggested by the fuel wholesaler or an associate of the fuel wholesaler, to collectively bargain with their fuel wholesaler regardless of their size or other characteristic.  
  • The class exemption is available for businesses to use from 3 June 2021.

How does a Business apply to be covered by the Class Exemption?

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.

What happens if our Business does not meet the Class Exemption Criteria?

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. 

Lavan Comment

The class exemption for collective bargaining for small businesses is an important development for those businesses that meet the eligibility criteria, given that:

  • the application process is quick, easy and does not require the payment of a fee;
  • the class exemption does not adversely affect businesses that already had legal protection under an authorisation or notification before the class exemption was introduced, but rather provides those businesses with an alternative avenue upon expiry of their existing authorisation or notification;
  • the existing authorisation or notification procedure is more complex and lengthy (particularly in the case of an authorisation) and involves the exercise of a discretion by the ACCC, with exemptions only being granted on a case-by-case basis;
  • legal protection under the class exemption is automatic and immediate for those businesses that meet the eligibility criteria, and therefore there is no exercise of a discretion by the ACCC; and
  • by collectively bargaining, businesses can reduce or share the time and cost of negotiating contracts, and have more negotiating power.  These benefits also flow through to counterparties because they do not have to negotiate with each business individually.

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:

  • they will still have to apply to the ACCC for an authorisation or a notification in terms of the existing application procedures which, especially in the case of an authorisation, may take longer (there is a six month time limit on authorisations) and be more complex (the application process for an authorisation involves several steps), are subject to the ACCC’s discretion and requires the payment of a lodgement fee;
  • legal protection under an authorisation or notification is not automatic or immediate; and
  • they will not have the benefit of reducing or sharing the time and cost of negotiating contracts, and may be in a less beneficial bargaining position.  The benefits will also not flow through to counterparties.

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.