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ACCC explores first class exemption for collective bargaining

4 mins  04.09.2018 Miranda Noble, Natasha Simonds

The ACCC is considering its first use of its new power to issue ‘class exemptions’.

The ACCC is seeking feedback on a proposed ‘class exemption’ that would allow eligible small businesses, agribusinesses and franchisees to collectively bargain with the customers they sell to or the suppliers they buy from. Collective bargaining by groups of businesses ordinarily raises concerns under Australian competition law, unless immunity is obtained through the existing ACCC ‘authorisation’ or ‘notification’ processes. The class exemption (if made) would allow some businesses to collectively bargain without using these formal processes

What is a class exemption?

A class exemption is a ‘safe harbour’. It permits the ACCC to exempt businesses from competition laws for certain ‘classes of conduct’ that may otherwise carry a risk of breach, but which:

  • do not substantially lessen competition, and/or
  • are likely to result in overall public benefits.

What conduct would be covered?

The ACCC can only make a collective bargaining class exemption if it is satisfied that the collective bargaining covered by the class exemption:

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

The ACCC has flagged the exemption will only cover collective bargaining that poses very little risk to competition and/or lead to overall public benefits.

ACCC is not considering a class exemption for collective boycott conduct.

How does this differ from authorisation / notification?

Authorisations and notifications require filing an application, payment of a fee and can take (in the case of authorisations) up to 6 months.
Businesses falling within the class exemption would automatically be exempt, removing the need (and cost) of authorisation or notification. Authorisation and notification remain options for businesses or conduct falling outside the exemption, or who wish to engage in a collective boycott.

How would the exemption operate?

Businesses would self assess whether proposed collective bargaining conduct falls within the scope of the class exemption. If so, businesses would be automatically exempt and could legally engage in that conduct (without a notification or authorisation), subject to any conditions specified by the ACCC. If not, businesses would need to consider whether to seek authorisation or lodge a notification, or not proceed with the conduct.

Who is eligible and when?

The class exemption would specify who it applies to and in what circumstances, including the size of businesses covered.

The ACCC is seeking feedback on the characteristics for defining eligibility, such as:

  • Number of employees of each business in the group
  • Turnover of each business in the group
  • Value of contract being made with target
  • Whether the target is above a certain size

The ACCC is also considering other issues, such as whether the class exemption should:

  • only be available to collective bargaining groups below a certain size (eg by number or combined market share)?
  • allow the bargaining group to negotiate with both customers they sell to (joint supply) and with suppliers they buy from (joint procurement)?
  • exclude sharing of information or arrangements between members of the group that are not necessary to collectively bargain with a target?
  • only apply where the bargaining group notifies the ACCC and / or the target when the group is formed?

What conditions or limitations might apply?

The ACCC may specify certain limitations, including that the class exemption only:

  • applies in particular circumstances;
  • applies to particular types of businesses; and/or
  • is subject to other specified conditions.

It must also specify the duration of the exemption. The ACCC may make class exemptions that last up to 10 years.

What is the impact of the target of collective bargaining conduct?

If made, a class exemption covering collective bargaining would permit a group of businesses to negotiate collectively with a target.

However, the class exemption would not force a target to deal with the bargaining group and can elect to negotiate with each business individually.

What other feedback is being sought?

The ACCC is seeking feedback on whether it should permit franchisees to collectively bargain with their franchisor regardless of their size or other characteristics. If this were the case, it would provide certainty that all franchisees who have contracts with the same franchisor or wholesaler would be able to form a single group, with no franchisees excluded. It would not, however, apply to collective negotiations with another target (eg a supplier). It is also seeking input on other issues specific to collective bargaining by franchisees with that should be considered in formulating the class exemption.

What happens next?

Feedback is due by 21 September.

If, following a review of submissions received, the ACCC decides to proceed with a class exemption for collective bargaining, it will engage in a second round of public consultation.

Our team can help you understand what the class exemption may mean for your business. We can help you draft and lodge a submission in response to the ACCC’s proposal. Comments and submissions are due by 21 September 2018.

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