The ACCC is seeking feedback on a proposed collective bargaining class exemption that would allow many smaller businesses to collectively bargain with their customers or suppliers.
The collective bargaining class exemption will provide eligible businesses with a'safe harbour' to engage in the conduct specified in the class exemption without the risk of breaching the relevant provisions of the Competition and Consumer Act 2010 (Cth) (CCA).
The 98.5% of businesses in Australia with less than $10 million aggregated turnover will get automatic protection for the conduct specified in the class exemption without having to lodge a formal application and pay a fee – provided they lodge a 'Collective Bargaining Class Exemption Notice' to the ACCC.
Eligible businesses will be required to self-assess whether they meet the eligibility criteria in order to determine whether they can rely on the collective bargaining class exemption.
The class exemption does not provide protection from the CCA for collective boycotts. If a business seeks to engage in collective bargaining that involves a collective boycott, the existing authorisation or notification processes must be used.
The ACCC has now developed a draft legislative instrument and related documentation upon which it is seeking feedback. Stakeholders have until 3 July 2019 to provide submissions. Following this round of public consultation, the ACCC will consider any submissions received and make a final decision about the collective bargaining class exemption.
Collective bargaining occurs when two or more competitors, or potential competitors, come together to negotiate with a supplier or customer, being the 'target' business, about certain terms, conditions or prices. In broad terms, such conduct raises concerns under the CCA, which requires businesses to operate independently of their competitors when making such decisions. The ACCC has the power to grant a class exemption if it is satisfied in all the circumstances that the conduct covered by the class exemption:
- Would not have the effect, or would not be likely have the effect, of substantially lessening competition; or
- Would result in, or would be likely to result in, a benefit to the public that would outweigh any detriment.
The proposed class exemption does not oblige the target business to negotiate with any bargaining group nor does it compel eligible businesses to join a group – instead it simply removes the risk that collective bargaining by eligible businesses will breach the relevant provisions of the CCA. The proposed collective bargaining class exemption would (if implemented) remain in place until 30 June 2029, unless revoked by the ACCC before that date. In 2028, the ACCC intends to conduct a review to determine whether to extend the class exemption beyond 30 June 2029.
Proposed eligibility criteria
The proposed collective bargaining class exemption provides legal protection from the CCA for:
- Any business or independent contractor with aggregated turnover of less than $10 million in the most recent financial year prior to joining the group;
- Any franchisee or fuel retailer, regardless of turnover, to participate in collective bargaining with their franchisor or fuel wholesaler. However, if franchisees or fuel retailers propose to collectively bargain with any supplier or customer that is not their franchisor or fuel wholesaler, the class exemption will only apply if they meet the $10 million turnover threshold.
The ACCC anticipates that the class exemption would be suitable for most eligible businesses involved in collective bargaining arrangements. The $10 million aggregated annual turnover threshold, which is consistent with the Australian Tax Office definition of a 'small business entity', means that around 98.5% of businesses in Australia would be covered by the class exemption should they wish to form a collective bargaining group.
An eligible business will receive immediate and automatic protection of the class exemption to collectively bargain with any target business, irrespective of the size of the target business, provided:
- The required 'Collective Bargaining Class Exemption Notice' (Notice) is given to the ACCC within 14 days; and
- Each member of the collective bargaining group meets the eligibility criteria.
To maintain the protection afforded by the class exemption, the Notice must also be provided to the target/s when negotiations commence and the collective bargaining must also be consistent with the scope of that Notice. Businesses can continue to use the existing authorisation and notification processes, including for collective bargaining arrangements, if they do not satisfy the class exemption eligibility criteria.
The Exposure Draft places limits around sharing information between bargaining group members, which is permitted only if:
- The information is shared or used to engage in the collective bargaining; and
- The eligible business reasonably believes that it would not be able to engage in the collective bargaining if the information is not so shared or used.
Accordingly, the class exemption will not protect businesses (who may be competitors) that share commercially sensitive information beyond that which is necessary to facilitate the collective bargaining process. This restriction also applies to any preliminary discussions that businesses may engage in before deciding to join a collective bargaining arrangement.
How can we assist your business?
- Consider the practical potential impact of the proposed eligibility criteria and the precise details of the Exposure Draft on your business either as a means to collectively bargain or as a 'target' of collective bargaining by others.
- Work with you to prepare, review and advise on your draft submission due by 3 July 2019.