News & Insights

From 3 June 2021, many businesses will be permitted to join together and ‘collectively bargain’ with their customers or suppliers, without having to apply to the Australian Competition and Consumer Commission for prior approval.

This is because the ACCC has granted a ‘class exemption’, which allows small businesses and franchisees to negotiate as a group without breaching competition laws.

the collective bargaining ‘class exemption’

The ACCC can grant a ‘class exemption’ to allow certain businesses to engage in conduct that may otherwise breach the Competition and Consumer Act 2010 (Cth).  To do so, the ACCC must be satisfied that the conduct is unlikely to lessen competition, or is likely to result in a net public benefit.

The collective bargaining ‘class exemption’ will permit the following conduct:

1. Small businesses (with a turnover of less than $10 million in the preceding financial year) can collectively bargain with their customers or suppliers;
2. Franchisees can collectively bargain with their franchisor (regardless of annual turnover); and
3. Fuel retailers can collectively bargain with their fuel wholesaler (regardless of annual turnover).

benefits for eligible businesses

The ability to jointly negotiate over common issues (such as trading terms and conditions) will allow eligible businesses to share the time and cost of contract negotiation, as well as improve their bargaining power in a transaction.

Further, as a result of the class exemption, eligible businesses who wish to collectively bargain will no longer be required to seek authorisation from, or formally notify, the ACCC (and accordingly, will not have to pay the substantial lodgement fees). Rather, from early 2021, competitors that qualify under this exemption must only provide a one-page notice to the ACCC, and to each target business with which they propose to collectively bargain. There is no fee for lodging this notice.

impacts for ‘target business’ on other side of negotiations

There is no compulsion for the target business (whether it is a customer, supplier or franchisor) to deal with a bargaining group as a whole. It can still elect to negotiate with each member of the group individually.

Nevertheless, the target business approached by the collective bargaining group may also enjoy time and cost savings by negotiating with the group as a whole, as opposed to negotiating with each business individually.

It should be noted that the ‘class exemption’ for collective bargaining will not override any existing legal or contractual obligations between the parties. This means that if a contract between a supplier and a customer (or between a franchisee and a franchisor, etc) contains confidentiality clauses, the business that joins a collective bargaining group is not permitted to share the protected confidential information with other members of the group.

If you are unsure whether your business is covered by this exemption, or would like more information on whether collective bargaining could help your business, please contact a member of our Trade Team.

Note: the ACCC intends to release further guidance about the class exemption in late February 2021, after the period for parliamentary disallowance expires and the exemption becomes available for use.