ACCC exemption would see franchisees with renewed bargaining power

The Australian Competition and Consumer Commission (ACCC) is considering a potential ‘class exemption’ that would allow small businesses, agribusinesses and franchisees to negotiate collectively with their customers or suppliers, including franchisors.

A class exemption provides the ACCC with the power to grant businesses an exemption from competition law for certain ‘classes of conduct’ that may otherwise risk a breach of competition laws, so long as the changes are likely to result in overall public benefits, and do not substantially lessen competition.

Specifically, the proposed exemption relates to collective bargaining, a process that allows competing businesses, such as retailers and franchises to jointly negotiate with customers or suppliers over common issues, such as price or conditions.

Ordinarily, collective bargaining has the potential to breach competition laws, however the implementation of a class exemption would provide a ‘safe harbour’ for eligible businesses to collectively bargain.

Mick Keogh, ACCC deputy chair said businesses can sometimes be better off negotiating with their customers or suppliers as a group.

“Working together, they may be able to negotiate more efficiently with larger businesses to achieve better terms and conditions than they can on their own,” Keogh said.

As part of the consideration, the ACCC is currently seeking feedback regarding which businesses should come within the scope of the collective bargaining class exemption and whether a class exemption should permit franchisees to collectively bargain with their franchisor, regardless of their size or other characteristics.

Traditionally, franchisees have little bargaining power with their franchisor, as the uniform business model requires franchisees to offer a consistent product or service, in keeping with the franchise network.

Often this can lead to a franchisor maintaining significant control over certain day-to-day operations of the franchisee’s business, which can in turn, result in dispute.

The ACCC believes that many, but not all, groups of franchisees would fit within the type of eligibility criteria that a collective bargaining class exemption would present, however is considering whether to specifically allow any group of franchisees to bargain with their franchisor, regardless of size or eligibility.

“Over the years the ACCC has considered many collective bargaining arrangements. Most come from groups of primary producers or other small businesses wanting to collectively bargain with a larger business; for example, farmers wanting to bargain with the company who buys their produce,” Keogh said.

“This has given us a good evidence base about the types of collective bargaining that produce public benefits and are unlikely to harm competition, and are therefore likely to be suitable for this exemption.”

At present, businesses partaking in the collective bargaining process are required to submit an application with supporting information and pay a lodgement fee, a lengthy exercise that can often take upwards of six months.

The potential class exemption would reduce the administrative and financial cost of collective bargaining for businesses with existing authorisation and encourage more businesses to take advantage of the process.

The ACCC is inviting feedback on these issues by 21 September 2018.