The Australian Competition and Consumer Commission (ACCC) has finalised the process by which small businesses can come together to collectively bargain with customers or suppliers, and fuel retailers can come together to collectively bargain with their franchisor or fuel wholesaler regardless of their size (with some caveats), without having to apply for an exemption to the ACCC. Available only after it passes through the Parliamentary process, the Class Exemption is expected to be available for SMEs and Fuel Retailers from early 2021.
Once it receives Parliamentary approval, this Class Exemption will allow eligible businesses to access the collective bargaining options without application for approval to the ACCC.
“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,” comments ACCC Commissioner Stephen Ridgeway.
“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,” continued Ridgeway.
Aimed primarily at small businesses there is also an important fuel industry element to the exemptions. For the downstream fuel industry, it will also allow fuel retailers to access the Class Exemption with specific caveats. This is in recognition of the fact that fuel retail businesses are often SMEs, however, due to the high volume low margin nature of the fuel product turnover may exceed the $10m SME cut off.
Which businesses are eligible?
The ACCC Class Exemption will allow:
- a business or independent contractor with aggregated turnover of less than $10 million in the preceding financial year, to form or join a collective bargaining group to negotiate with suppliers or customers about the supply or acquisition of goods or services
- franchisees to collectively bargain with their franchisor (regardless of the franchisee’s aggregated turnover), and
- fuel retailers who have fuel re-selling agreements with the same fuel wholesaler, and operate under the same system or marketing plan determined, controlled or suggested by the fuel wholesaler or an associate of the fuel wholesaler, to collectively bargain with their fuel wholesaler (regardless of the fuel retailer’s aggregated turnover).
What is an ACCC Class Exemption?
A Class Exemption is a way for the ACCC to grant businesses an exemption from competition law for certain type of conduct that may otherwise risk breaching competition laws, but that:
- do not substantially lessen competition, and/or
- are likely to result in overall public benefits.
The Class Exemption will operate alongside the ACCC’s existing ‘authorisation’ and ‘notification’ processes, which a business who falls outside the Class Exemption will still be able to seek legal protection.
What is Collective Bargaining?
This Class Exemption relates to collective bargaining: a process that allows groups of businesses, including farmers, small businesses or fuel retailers (with caveates), to jointly negotiate with their customers or suppliers over common issues (e.g. terms, conditions and/or prices).
The group of businesses, the Group, come together to negotiate with the supplier for example. In this example the Group would be coming together to bargain with the supplier who is known as the Target.
Negotiating as a Group can allow businesses to share the time and cost of negotiating contracts, and potentially give group members more input into contract terms and conditions. There are often also time and cost savings for the Targets (suppliers or franchisor) the Group is bargaining with.
The Class Exemption does not force anyone to join a collective bargaining Group, or force a Target (customer, supplier or franchisor) to deal with the bargaining group if they do not want to.
The Target business will be free to continue to negotiate with each member of the Group individually. The Class Exemption simply removes the risk that collective bargaining by eligible businesses will breach the competition law.
Accessing the Class Exemption
Accessing the Class Exemption will not require application to the ACCC, but that does not mean that there are no requirements. The business will still need to provide the ACCC with a simple 1 page Notice Form to the ACCC. This Notice Form will be free to lodge and will be required to outline the details of the businesses to be approached to collectively bargain.
The ACCC Class Exemption is expected to pass the Parliamentary approval process and be available for businesses to use in early 2021. Notice Forms and detailed information will be released at that time.
It is important to note that while the Class Exemption from the ACCC does allow businesses to come together to collectively bargain, for example with suppliers, it does not override contractual confidentiality terms. ACAPMA reminds Members that many Branding and CA agreements contain detailed provisions around the disclosure of business information, and Members should review their agreements and/or discuss implications with their partners prior to engaging in collective bargaining to ensure these provisions are not breached inadvertently.
For more information on the Class Exemption see; https://www.accc.gov.au/public-registers/class-exemptions-register/collective-bargaining-class-exemption