On 8 July 2016, the Australian Competition and Consumer Commission (ACCC) published a new collective bargaining guide for small businesses and farmers. The guide works through the benefits of cooperative arrangements whereby small businesses group bargain with larger corporations or participates in joint boycotts. This article unpacks the ACCC’s collective bargaining guide for small businesses and farmers.
1. What is Collective Bargaining?
Collective bargaining in the context of this new guide is the phrase used when two or more competitors get together to negotiate price, terms and conditions with larger corporations. It will be a collective arrangement when two or more small businesses jointly enter into negotiation with a more major company, or they act together in a boycott against the larger corporation.
An example is when farmers supply fresh produce to a supermarket. The farmers might seek to enter jointly into negotiation with the supermarket. Alternatively, farmers might strive to organise a boycott of their product supplies to the supermarket’s disadvantage.
2. What are the General Rules of Collective Bargaining?
Without retaining the ACCC’s approval, the above collective arrangements may run the risk of breaching the Competition and Consumer Act 2010 (Cth) (CCA).
Breaching the CCA can result in significant penalties against the small businesses and large corporation. This is because competitors are required to act independently in the course of their business dealings.
Any collusion in relating to pricing (i.e. “price fixing”) or other business decisions is condoned. Section 45 of the CCA prohibits contract, arrangements or understandings that are likely to “substantially lessen competition”.
3. What are the Benefits of Collective Bargaining for Small Businesses and Farmers?
In its Collective Bargaining Guide, the ACCC lists the benefits collective bargaining has for small businesses and farmers as well as larger corporations.
Benefits for the Small Business
The benefits for small businesses acting together are varied. It can:
- reduce the time and cost of putting supply arrangements in place;
- increase the opportunity to negotiate terms to reflect the group’s needs – thereby providing the smaller businesses with a more even playing field;
- increase the quality of information (i.e. businesses can share information and gather costs to engage professional counsel);
- open new market opportunities in that the collective group might be viewed as a more attractive investment; and
- streamline and coordinate supply chain efficiencies (i.e. ordering and delivery capabilities)
Benefits for the Large Corporation
The benefits for giant corporations can include:
- reducing costs involved with negotiating separately;
- increasing certainty and boosting orders; and
- increasing efficiency in receiving information from small businesses.
Benefits of Collective Boycotting
In some situations, the ACCC recognises the benefit in collectively boycotting. It may be beneficial, for example, when it is necessary to achieve the productivities associated with collective bargaining.
4. When will the ACCC Authorise Anticompetitive Behaviour?
In certain circumstances, collective arrangements may be in the public’s interests. It will be in the public’s interest where the group has cooperative objectives and requirements.
Section 88 of the CCA gives the ACCC power to exempt businesses from seemingly anticompetitive behaviour when it is actually for the public’s benefit. Section 90 of the CCA sets out the procedure for granting such an exemption.
Striking a balance between what is considered competitive or not can be tricky. From its experience, the ACCC understands that collective bargaining for small businesses is important. Generally, the public’s benefit will outweigh any detriment. Accordingly, the ACCC has confirmed that most collective arrangements have been approved whereby participation is voluntary between the small and large corporations. While this might be so, each case is assessed on its merits.
5. How Do You Gain the ACCC’s Approval?
There are two ways to gain the ACCC’s approval. These are by:
- Lodging a “notification” to the ACCC: This process is used when all bargaining members are upfront and unlikely to change over time and there is one large corporation the small businesses intends to deal with; and
- Applying for “authorization” to the ACCC: This process is usually longer than notification. However, it is more flexible in that it can suit arrangements where there are groups that come and go, or there is a breadth of stakeholders the small business intend to deal with.
Both of these processes include a public consultation. The applications and submissions are then placed on the ACCC’s public register.
In working together, small businesses and farmers are seen to have equal footing against the bigger businesses they seek to make arrangements with. The ACCC believes that when small businesses act jointly, they are in a better position to negotiate terms and conditions with larger businesses than they could achieve on their own. Contact LegalVision’s lawyers to assist you with any questions you may have. Call us on 1300 544 755.