ACCC considers allowing small businesses and franchisees to collectively bargain with the big end of town

Australian small businesses and franchisees may soon be able to freely collectively bargain with big business and suppliers, with the Australian Competition and Consumer Commission (ACCC) considering collective bargaining class exemptions for the sector overall.

In a discussion paper released late last week, the ACCC put forward its case to grant Australian small businesses, agribusinesses and franchisees a class exemption for collective bargaining. This would allow local businesses to band together with competitors or fellow businesses to negotiate things such as contract terms or prices with customers and suppliers without having to seek a specific formal approval from the ACCC first.

Currently, collective bargaining for small businesses is illegal under Australian Competition Law, unless those businesses operate in areas previously granted class exemptions, such as newsagents, dairy farmers, and post office owners, or unless the group wanting to undertake the bargaining process has approval from the ACCC.

Speaking to SmartCompany, ACCC deputy chair Mick Keogh says the Commission receives around 160 requests for collective bargaining exemptions each year and many of those requests come from small business owners.

The majority of those cases involve small businesses are negotiating with big business, and Keogh says in most cases, there’s mostly no question collective bargaining would lead to a net public benefit. This has prompted the ACCC to consider a class exemption for the sector.

“Right now, the individual authorisation process requires formal documentation to be provided to the ACCC, which we consider and then release for public comment. Then we release a draft authorisation which we also seek response for, before issuing our final determination,” says Keogh.

“It can take up to six months or more, and involved significant expenditure for all parties.”

The class exemption for small businesses and franchisees would result in massive cost savings for businesses hoping to collectively bargain, Keogh says, and would also make the whole system a lot simpler and “easier to operate”.

When it comes to the franchising sector, Keogh says franchisees often end up involved in collective bargaining processes with their franchisor over pricing and contract terms. Similarly, franchisors may need to individually consult with a large number of franchisees to make changes to their legal agreements or documentation.

“Right now, they would need to go and negotiate those changes with each franchisee, but with this exemption, all franchisees could get together and negotiate the changes with the franchisor,” says Keogh.

Questions on how to define a small business

The ACCC’s discussion paper is seeking public responses until September 21. The Commission will then consider the responses and make a decision. A further round of public consultations will then take place if the exemption is to be enacted.

Keogh says the Commission is hoping to get public views on a range of key points to the class exemption, including how a ‘small business’ should be defined.

The ACCC is reluctant to immediately use the ATO’s definition of a business having up to $10 million in annual turnover without consultation, with Keogh saying there are currently five different guidelines from varies government bodies as to what defines a small business.

The ACCC is also considering if the number of businesses able to collectively bargain under the proposed exemption should be limited, if the exemptions should cover bargaining with both customers and suppliers, and what other obligations should apply.

Keogh also says the ACCC wants to stress these exemptions would not compel businesses big or small to participate in collective bargaining processes, and that members who do not agree to be part of a collective bargaining process won’t be in breach of any rules.

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