Collective bargaining by small business facilitated by class exemption

From today, small businesses, franchisees and fuel retailers can use the ACCC’s class exemption for collective bargaining. This class exemption, which is the first made by the ACCC, will allow collective negotiation without first having to seek ACCC approval.

The class exemption applies to businesses and independent contractors who form, or are members of, a bargaining group, and who each had turnover of less than $10 million in the financial year before the bargaining group was formed. This covers more than 98 per cent of Australian businesses.

Under the arrangement, small businesses and farmers can bargain with their suppliers and processors, eligible franchisees will be able to collectively negotiate with a franchisor, and eligible fuel retailers will be able to collectively negotiate with a fuel wholesaler.

“This class exemption will help the majority of small businesses and franchisees, including groups of farmers wanting to bargain with the companies who buy their produce, and small businesses wanting to jointly buy electricity,” ACCC Deputy Chair Mick Keogh said.

“When they bargain collectively, businesses can share the time and cost of negotiating contracts, and have more say when negotiating.”

While collective bargaining by small businesses does not generally harm competition, when competitors act together they require some form of exemption to avoid the risk of breaching competition laws.

Previously, exemptions were only available case-by-case, through an ACCC ‘authorisation‘ or ‘notification‘. This new class exemption removes the need for most small businesses to use those processes.

The class exemption process is quicker and easier and allows eligible groups to obtain protection from competition law for bargaining free of charge, simply by providing a one-page notice to the ACCC.

“The counterparties that small business groups collectively bargain with can also benefit from time and cost savings, because they will not have to negotiate with each business individually,” Mr Keogh said.

More information about the class exemption can be found at Collective bargaining class exemption.

Note

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 want to. It simply means 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 party would still be free to choose to continue to negotiate with each member of the group individually.

Businesses that fall outside the scope of the class exemption (for example, larger businesses or those with more complex arrangements) are 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.

All franchisees and fuel retailers governed by either the Franchising Code of Conduct or the Oil Code of Conduct can also use the class exemption to collectively negotiate with their franchisor, regardless of their aggregated turnover.

Background

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

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.

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

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 suitable for a class exemption.

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