CN04 - ACCC issues first class exemption allowing small businesses to collectively bargain

The Australian Competition and Consumer Commission ("ACCC") issued the first class exemption allowing small businesses, franchisees and fuel retailers to collectively bargain with suppliers or customers without first seeking specific exemption from the ACCC.  Eligible businesses need only lodge a notice form to receive protection from what might other constitute a breach of Australian competition law for collective bargaining. 

Key takeaways

• Small businesses, franchisees and fuel retailers can rely on the ACCC’s class exemption for collective bargaining from 3 June 2021. The class exemption will provide legal protection until 30 June 2030.
• The exemption can be claimed by lodging a notice form with the ACCC and giving a copy of the notice to the target with whom the group will negotiate. The exemption permits collective bargaining, but does not permit participants to refuse to deal with the target.
• The exemption, expected to be well received by the small businesses community, will mean that eligible businesses can share the time and cost of negotiating contracts and enter into negotiations with great bargaining power.

Collective bargaining

Collective bargaining is where a group of competitors come together to negotiate with a customer or supplier about terms, conditions and/or pricing.  The ability for businesses to negotiate as a group enables them to share the time and cost of negotiating contracts, and can potentially give group members more bargaining power and therefore input into terms, conditions and price.  There are also potential time and cost savings for the supplier, franchisor or customer (as the case may be) that the group is bargaining with.

Class exemptions

The ACCC has the power to grant a class exemption that provides eligible businesses legal protection for conduct that may otherwise be in breach of Australian competition law.  The ACCC must be satisfied that the conduct covered by the class exemption:

• would not have the effect, and would not be likely to have the effect, of substantially lessening competition; and / or
• would result in, or would be likely to result in, a benefit to the public that would outweigh any detriment.

Prior to the introduction of the small business class exemption, small businesses wishing to engage in collective bargaining had to seek specific ACCC authorisation for this form of protection. 

Eligibility and legal protection 

The class exemption covers:

• businesses with an aggregated turnover of less than AUD 10 million in the financial year prior to them forming or joining a bargaining group; and
• franchisees and fuel retailers to collectively bargain with their franchisor or fuel wholesaler respectively, regardless of their size or turnover.

The class exemption allows collective bargaining and permits participating businesses to share information with, and use information shared by the other parties in a group - provided such information shared to engage in the collective bargaining and the business believes it is reasonably necessary to share or use the information to facilitate the conduct.

Importantly, the exemption is not available for collective bargaining in relation to the supply of goods or services to a customer or customers, for personal, domestic or household use by that customer or those customers. In addition, consistent with the ACCC's approach to specific authorisations, the class exemption does not permit participating businesses to refuse to contract with the target, supplier or customer – ie, boycott conduct will continue to be prohibited.  As a consequence, participating businesses cannot effectively "force" a target to deal with them as a group, or agree that they will only deal with the target as a group. 

Claiming the class exemption 

Eligible bargaining groups will be required to complete a one-page form in order to be granted legal protection under the exemption.  The form and accompanying instructions are available on the ACCC website.  Protection will commence immediately after lodgement with the ACCC, and the process is free from cost.  Completed notices will be published on the ACCC's Collective Bargaining Notification Register.

Conclusion

The class exemption became available for eligible businesses from 3 June 2021 and will provide legal protection until 30 June 2030. This protection is estimated to apply to more than 98% of Australian businesses.  It has also been suggested that it will encourage significant economic growth following the effects of the COVID-19 pandemic. This is a positive development for the Australian small business community - a simple and accessible process that provides greater certainty and legal protection during a period of great uncertainty.

With thanks to Tom Allen and Alana Perna, Associates for their contribution