Collective bargaining for small businesses given avenue through the ACCC

A class exemption being applied in early 2021 will enable small businesses to collectively bargain
An ACCC class exemption due to commence in early 2021 will allow small businesses, franchisees and fuel retailers to collectively negotiate with their suppliers and processors, franchisor or fuel wholesaler respectively, without first having to seek ACCC approval.

Businesses will be able to use the class exemption after the period for parliamentary disallowance expires in early 2021. This collective bargaining exemption is the first class exemption to be introduced by the ACCC.

Although collective bargaining by small businesses generally does not harm competition, it involves competitors acting together, and those businesses therefore require some form of exemption to avoid the risk of breaching competition laws.

Currently this is only available via the ACCC’s ‘authorisation’ or ‘notification’ processes, but this new class exemption will remove the need for most small businesses to use those processes.

“We hope this class exemption will help a range of Australian small businesses and franchisees,” ACCC Commissioner Stephen Ridgeway said.

“There can be many benefits for businesses negotiating as a group rather than individually, including sharing the time and cost of negotiating contracts, and potentially giving group members more of a say on contract terms and conditions.”

“There are often also time and cost savings for the suppliers or franchisor the group is bargaining with. This change will mean the benefits for all parties can be gained through a much simpler and quicker process,” Mr Ridgeway said.

The class exemption will apply to businesses and independent contractors who form, or are members of, a bargaining group, and who each had an aggregated turnover of less than $10 million in the financial year before the bargaining group was formed.

This will cover more than 98 per cent of Australian businesses.

In addition, all franchisees and fuel retailers governed by either the Franchising Code of Conduct or the Oil Code of Conduct will also be able to collectively negotiate with their franchisor, regardless of their aggregated turnover. 

Bargaining groups will only have to fill out a simple, one page form, and provide it to the ACCC. Legal protection from competition laws will then commence automatically. There will be no fee for lodging the form.

“The class exemption will also increase levels of awareness among small businesses about the potential benefits of collective bargaining which, along with the simpler process, may encourage more businesses to collectively bargain,” Mr Ridgeway said.

The ACCC will release further information about the class exemption, including the form businesses need to lodge with the ACCC and a guide to using the class exemption, in early 2021 when the class exemption becomes available for use.

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

Background to its formation

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 don’t 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) 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.

Class exemption registration process

Once the ACCC has made a decision to make a class exemption there are a number of administrative steps that are required for the class exemption to commence operation.

The ACCC must lodge the legislative instrument and an explanatory statement with the Office of Parliamentary Counsel for registration on the Federal Register of Legislation.

The instrument must be tabled in Parliament within six sitting days after registration. It is then subject to a disallowance period of 15 sitting days.

Once the disallowance period has passed the ACCC will set a commencement date for the class exemption. Precisely when this will occur is dependent on the Parliamentary sitting dates for 2021, which have not yet been finalised.

Effective from 2017

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 that risk breaching competition law.

The collective bargaining class exemption is the first class exemption the ACCC has made under this new power.

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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