Collective bargaining exemptions in commerce for SMEs

ALEXANDER MACKEY, LEGAL COUNSEL, HOMESTART FINANCE

The following article summarises a presentation given at the Commercial Law Conference on 26 August 2022, the presenters were Thomas Cadd (Barrister), Miriam Kolacz and David Hatfield (both of the Australian Competition and Consumer Commission) with the session chaired by Andrew Bampton of Bampton Law.

Until recently exemptions for collective bargaining were only possible on a case-by-case basis using the notification process under section 93AB or the authorisation process under section 88 of the Competition and Consumer Act 2010.

A review of competition policy in 2017 resulted in a deregulatory approach, providing the ACCC with the ability to make class exemptions for specific types of conduct.1

In June of 2021 the ACCC issued a class exemption that is available for three classes of businesses. It enables members of those classes to engage in collective bargaining arrangements with other businesses, such as suppliers and business customers.2

The class exemption that has been created is for: • a business or independent contractor to participate in collective bargaining, provided the business or independent contractor had an aggregated turnover of less than $10 million in the most recent financial year prior to joining the group, and • any franchisee or fuel retailer, regardless of turnover, to participate in collective bargaining with their franchisor or fuel wholesaler.3

Businesses that are within the scope of the class exemption have automatic protection from the risk of breaching competition laws designed (in part) to prevent or deter collective bargaining (i.e. Part IV of the Act).

Ordinarily, it would be illegal for competitors to work together to try to negotiate better prices or terms, the rationale being that such activity would typically lessen competition and be counter to the interests of the consumer, hence the need for cartel conduct provisions in the Act.

However, it is also the case that certain instances of collective bargaining can, as it turns out, support competition and benefit the consumer, hence the existence of Part VII of the Act containing the authorisations and notifications regime (including for collective bargaining).

Where collective bargaining by competing businesses with suppliers and business customers about terms and conditions or prices would be good for competition and consumers, it can be allowed by an authorisation or notification.

The ACCC’s experience was that the vast majority of voluntary small business collective bargaining arrangements were in the public interest.

The introduction of a targeted, automatic, class exemption was therefore the next step. How do the Options Compare?

Now that the class exemption power has been created and used, there is an avenue for automatic protection that involves fewer administrative steps, lower cost and quicker turnaround than the traditional notification and authorisation options under Part VII.

For comparison purposes the relevant provisions of the Act are s 88 (Authorisation), s 93AB (Notification of Collective Bargaining) and s 95AA (Class Exemptions).

Under s 88 (Authorisation) if a person wants to engage in conduct to which Part IV of the Act would (or might) apply, the person can apply to the ACCC for an authorisation to engage in that conduct. The Commission may grant authorisation(s) for any or all conduct specified in an application. The application process and other matters are covered in s 89. The application fee is $7,500.4

Under s 93AB (Notification of Collective Bargaining) a corporation can enter contracts that contain cooperation provisions, with one or more other persons about the supply or acquisition of goods or services from another party (the target), not exceeding $3,000,000 in one 12-month period (subject to giving a collective bargaining notice in the approved form5 and paying the prescribed fee of $1,000).6

Restrictions exist for notices that are the subject of an application for authorisation under s 88, relate to an application for an authorisation that has been dismissed, or given by a trade union on behalf of a corporation.7 The ACCC can also object to a collective bargaining notice if the perceived benefits to the public are outweighed by the harm that has or would likely result from the relevant provisions. 8 A collective bargaining notice is also generally only valid for 3 years from the date it was given.9

Under section 95AA (Class Exemptions) the ACCC can determine that Part IV of the Act does not apply to conduct that does not (or would be unlikely to) lessen competition or where the public benefit outweighs public detriment. The determination can also be limited to persons, circumstances or conduct of a specific kind which creates a class to which the exemption applies. There is also no fee, a simplified notice procedure and the class exemption can be in force for up to 10 years.10

During the conference presentation the ACCC’s representatives explained that the $10M aggregated annual turnover was selected as the turnover threshold that each group member could not exceed for a few reasons: 1. It is broad enough and simple enough to be useful 2. It avoids the inclusion of big business, where collective bargaining has greater potential to raise competition concerns 3. It is an ATO threshold for certain small business tax concessions, so most businesses will know whether they are under or over it.

In summary, the options compare as follows:

SECTION 88 (AUTHORISATION) • Fee $7,500 • In force for period of authorisation subject to variation or revocation • Prescribed form, information, and documentation • Any matters relevant to

Part IV of the Act • Determination to be made within 6 months • Fee $1,000 • Safe harbour 3yrs < 10yrs • Notification period then reapply • Can include a collective boycott • Contract value <$3M with target business • Can become effective after 14 days • No fee • Effective to 30 June 2030 • 1 page form • Excludes collective boycotts • Group member <$10M aggregate annual turnover • Automatically effective

SECTION 93AB (NOTIFICATION)

SECTION 95AA (CLASS EXEMPTIONS)

Franchisees and fuel retailers are included because, even though they may often be over the $10M threshold, they are typically in a weak bargaining position compared with their respective franchisors and fuel suppliers.

The class exemption is not without its restrictions. For instance, the provisions do not operate to permit a collective boycott11 (an authorisation or notification is still required for that), the sharing of information is limited to what is reasonably necessary to facilitate the collective bargaining process,12 and protection will not extend to conduct for which the ACCC has previously denied or revoked protection.13 Commentary

The views of the panel reflected the idea that the benefits for business in the class exemption determination include simpler, quicker, cheaper notification process, comprising a 1-page notice with no fee, that provides automatic protection (compared to a potential 6 month wait for an authorisation).

The introduction of the class exemption may also encourage the take up of (permitted) collective bargaining and provide the ability to realise the benefits of collective bargaining sooner, reducing time and costs, creating opportunities for SMEs to secure better terms and conditions and prices with all the benefits to supply chain and distribution that such things bring.

The ACCC’s first class exemption is a simple stream-lined process, and the previous authorisation and notification regime is still available for other situations or as an alternative.

From the perspective of the ACCC, take up is going well and it has created operational efficiency for the team handling authorisations and exemptions.

The session chair, Andrew Bampton, observed that class exemptions are a dramatic step forward to level the playing field for small business and with increases to the cost-of-living becoming topical, some suppliers may be opportunistically “gilding the lily” with price hikes that do not necessarily match inflation. He observed that class exemptions could act as a check and a balance against that sort of behaviour.

An issue also arose about whether separate collective bargaining groups in different areas could share information and the view was “no they can’t”. The focus is on sharing information only within the collective bargaining group, and inter-group sharing would require a broader authorisation. Confidentiality provisions in contracts may also prevent the sharing of that information anyway.

A further observation was made by the ACCC presenters that collective bargaining does not always correct disproportionate bargaining power; it is just another tool in the toolbox. Indeed, Thomas Cadd reminded those in attendance that regulating competition is not about everyone having the same price or the same thing all the time, it is about ensuring there is the capacity for prices to rise and fall and contractual terms to change under appropriate market conditions.

After just over twelve months of operation it seems that when it comes to facilitating collective bargaining the class exemption determination is a practical alternative to the traditional Part VII regime.

Many thanks to the presenters and the session chair who volunteered their time to speak on this topic at the conference and review this article. B

Endnotes 1 Competition and Consumer Amendment (Competition

Policy Review) Act 2017 received Royal Assent on 27 October 2017 and inserted Part VII, Division 3 – Class exemptions, into the Competition and

Consumer Act 2010 2 Collective Bargaining Class Exemption

Guidelines, ACCC, June 2021, https://www.accc. gov.au/publications/small-business-collectivebargaining-guidelines 3 see Competition and Consumer (Class Exemption

Collective Bargaining) Determination 2020 and the Collective Bargaining Class Exemption

Guidelines, see note 2 4 Schedule 1B Competition and Consumer Regulations 2010 5 s 93AB(1) Competition and Consumer Act 2010 6 s 93AB(6) of the Act and Schedule 1B of the

Regulations 7 s 93AB(8) and (9) 8 s 93AC(1) 9 s 93 AD(3) 10 s 95AA of the Act and ss 4 and 7 of the

Competition and Consumer (Class Exemption Collective

Bargaining) Determination 2020 11 s 8 of the Competition and Consumer (Class

Exemption Collective Bargaining) Determination 2020 12 Ibid s 13 13 Ibid s12(3)