If you are a small business, it may be beneficial for you to join with competitors to engage in collective bargaining with a substantial or dominant supplier in your industry. However, this may breach the Competition and Consumer Act 2010 through the cartel and competition provisions of the act.
Despite this, the ACCC recognises that collective bargaining by small businesses can sometimes result in better or fairer outcomes. As a consequence, the ACCC has provided three forms of relief which we discuss further below.
What is Collective Bargaining?
Collective Bargaining occurs when two or more competitors form a group to negotiate with a supplier about terms, conditions and/or prices. For example, if your business does not have the capital to buy enough products to qualify for a discount, joining up with other businesses to collectively bargain with a supplier of those goods may qualify the group for a bulk discount.
Other benefits include:
- Reducing and/or sharing the time and the cost of putting supply arrangements in place
- Optimising supply chain efficiencies
- Creating new marketing opportunities with more stock in supply
While collective bargaining may be quite beneficial to businesses as a whole, they still risk breaching the cartel and competition provisions of the Competition and Consumer Act 2010.
How do I work around them – forms of relief?
Notification
A notification is the simplest way in which small businesses may qualify to collectively bargain. To limit this to strictly small businesses, the expenditure on the part of the small business with the targeted supplier must be less than $3 million in a 12 month period. Higher thresholds apply to other industries:
- Petrol Retailing – $15 million
- New Motor Retailing – $20 million
- Farm Machine Retailing – $10 million
- Primary Production – $5 million
Lodging a valid notification involves filling out the form from the ACCC website. A $1000 fee applies per notification. Once the notification is lodged and there are no objections raised by the ACCC, protection commences 14 days after it was lodged. Protection remains for three years beginning on the day the notification was lodged.
Class Exemption
As of the 3rd June 2021, a class exemption to engage in collective bargaining may be sought. This allows a business with a turnover of less than $10 million in the financial year prior to them forming a collective bargaining group with competitors to negotiate with against suppliers. Franchisees and fuel retailers may also apply for a class exemption regardless of their turnover.
Small businesses must complete a notice form and lodge it with the ACCC. Once lodged, legal protection automatically commences and lasts until 30 June 2030.
Authorisation
Unlike a notification, there is no monetary threshold required, anyone may apply for an authorisation.
Lodging an authorisation is a lengthy process. Collective Bargaining groups must download and fill out the form on the ACCC website. A fee of $7500 applies to the authorisation. Once the form is sent, the ACCC will consult with the target business and then issue a draft of determination setting out the reasons for the ACCC’s proposed decision as to whether the authorisation is granted or rejected. The ACCC will then invite written or oral submissions in response to the draft and a final determination will be sent out. The ACCC will only grant an authorisation if it considers that there is a net public benefit in doing so.
The ACCC specifies when legal protection starts in the final determination. This must not be earlier than 21 days after the final determination is issued. There is no strict deadline of when the authorisation expires as each authorisation is examined on a case by case basis. In most cases, authorisations last for 5 years.
If you have any queries, feel free to contact Michael Bishop at our office.
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