The Australian Competition and Consumer Commission (ACCC) authorised collective bargaining for the members of the Western Australian Broiler Growers Association in dealing with the chicken processors they supply.
Generally, under Australian Consumer Law, businesses are required to act independently to ensure competitive prices for consumers. Agreements such as cartel arrangements are considered a breach of the Australian Consumer Law and the Competition and Consumer Act 2010.
What is Collective Bargaining?
‘Collective bargaining’ describes a situation where a number of businesses or companies work together to negotiate with one another under terms of an agreement. This often happens with two or more competitors negotiating with their supplier over terms such as pricing of a product. The group of businesses may appoint a representative such as an association or industry body to negotiate on their behalf.
Collective bargaining is considered anti-competitive as it involves competitors working together. However, there are situations where the ACCC will allow collective bargaining, especially when public benefit outweighs the disadvantages of competition.
Businesses can apply to the ACCC for authorisation so that they can engage in anti-competitive activity. If businesses are concerned that their arrangement may be considered a breach of consumer law, it is prudent for them to apply for authorisation. To assess whether there is a significant public benefit, the ACCC must go through a public consultation process and make a decision within six months of the application.
Western Australian Broiler Grower Association
The Western Australian Broiler Grower Association lodged an application for authorisation on 15 February 2016. On 31 May 2016, the ACCC issued their authorisation, which allows the Association to bargain collectively with the chicken processor for ten years.
The rationale behind the decision was for the transactional costs savings that would arise from the broiler growers having more say in negotiations with the chicken processors. If smaller businesses can have a greater say when dealing with bigger businesses, it can have a positive impact on consumers who will benefit from lower chicken meat prices.
The Association is roughly made up of 30 broiler members who supply three processor businesses in Western Australia. According to the processor their business works with, they will be split into three bargaining groups.
Authorisation means that even though collective bargaining is considered to be anti-competitive behaviour, the Association is protected by the provisions of the Competition and Consumer Act and from any court action arising from anti-competitive conduct.
The ACCC believes that collective bargaining with small farmer groups typically benefits the public interest and should be allowed. However, authorisation is still declared on a case by case basis and is not a given in any situation.
The Competition and Consumer Act prohibits anti-competitive conduct and its adverse effect on consumers and the general public. The ACCC can provide exemptions to groups where the effect of anti-competitive behaviour on consumers is not detrimental and is, in fact, beneficial. Small businesses such as small farmers can keep prices competitive by engaging in collective bargaining, which strengthens their position in negotiations.
Companies who are considering working together in this way should seek permission from the ACCC to avoid breaching the CCA. Get advice from a consumer lawyer before proceeding. Get in touch on 1300 544 755.