Under a class exemption recently made by the ACCC1, small businesses will be entitled to collectively bargain with customers and suppliers without breaching competition laws. This is the first class exemption to be introduced by the ACCC, following the regulator being given the power to grant certain class exemptions back in 2017.
This class exemption could significantly impact businesses that contract with small businesses and it is likely to encourage small businesses across all industries to set up collective bargaining groups to address power imbalances and to negotiate with large customers or suppliers.
Who can use this class exemption?
The exemption is available to:
- businesses (including farmers, growers, independent contractors) which each have an aggregated turnover of less than $10 million in the preceding financial year to collectively bargain with customers or suppliers; and
- franchisees including motor vehicle dealers (covered by the Franchising Code) to collectively bargain with their franchisor, regardless of their size.
This will cover more than 98.5% of businesses according to the ACCC2.
What protections are provided to small businesses by the class exemption?
Currently, all businesses that engage in collective bargaining conduct risk breaching Australia’s competition laws as this would otherwise generally involve competitors coming together to co-ordinate their negotiations with customers or suppliers over common issues (e.g. terms and conditions of supply or acquisition and/or prices). The class exemption however provides small businesses with a “safe harbour” to engage in collective bargaining conduct without fear of breaching competition laws and without needing to seek specific ACCC approval by way of the authorisation or notification process.
Are there any limitations to the protections provided by the class exemption?
The class exemption is subject to certain important limitations. These include the following:
- It only covers contracts, arrangements or understandings between eligible businesses which are for the substantial purpose of “collectively negotiating” with a target business. It does not apply to collective boycotts (i.e. refusing to contract with a target business).
- It does not protect collective bargaining for the supply of goods or services to a target business for their non-commercial use.
- It is only available to businesses who have a reasonable expectation of contracting with the target business, regardless of whether such a contract is ultimately made. This is to ensure that collective bargaining groups are confined to members who have a “legitimate, shared interest in collectively bargaining with the same target(s)”3.
- It is not available to businesses which have previously made an unsuccessful attempt to obtain an authorisation or notification in relation to the conduct.
- It only permits businesses to share and use information when this is reasonably necessary to engage in the collective bargaining conduct. Small businesses that are competitors therefore need to take care not to share more competitively sensitive information than is necessary for the collective bargaining process, both before and after joining a collective bargaining group.
- A “Collective Bargaining Class Exemption Notice” must be lodged with the ACCC within 14 days of the conduct and a copy of the Notice must be provided to the target business. The collective bargaining must also be consistent with the scope of the Notice.
What does a small business need to do to get the benefit of the class exemption?
Businesses will self-assess their eligibility to rely on the exemption, and if they seek to rely on it, they will need to lodge a simple, one page notice with the ACCC when the group is formed and also notify each target business that the group proposes to collectively bargain with, when they first approach the target business. No fee is payable for lodging the form. These forms will be on the ACCC’s public register. Importantly, legal protection from competition laws commence automatically on lodgement.
The 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 don’t want to do so. It simply means that the group can collectively bargain with the target business on a voluntary basis without needing to worry about a possible breach of competition laws. The target business is still free to choose to continue to negotiate with each member of the group individually or to deal with the group collectively.
What if a business or the conduct falls outside the scope of the class exemption?
Larger businesses or those with more complex arrangements 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.
When will the class exemption be available?
It is likely that the class exemption will be available for businesses to use in early 2021 once a number of administrative and other parliamentary procedural steps have been attended to.
1. Competition and Consumer (Class Exemption – Collective Bargaining) Determination 2020, 19 October 2020.
2. Paragraph 23 of the Explanatory Statement to Competition and Consumer (Class Exemption – Collective Bargaining) Determination 2020, prepared by the Australian Competition and Consumer Commission
3. Attachment 1 to the Explanatory Statement, Paragraph 11.
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This document is for general information only and cannot be relied upon as legal advice.