March 2009

Businesses fail to take advantage of collective bargaining protections

Outline

The ACCC's recent decision not to object to the collective bargaining notification lodged by Wizard Homes Loans franchisees highlights the benefits of the process. This allows Wizard Home Loans franchisees to collectively negotiate aspects of franchise agreements with Aussie Home Loans and GE Money. [1] However, ACCC's collective bargaining notifications register indicates that businesses are not taking advantage of this protection.

The Trade Practices Act 1974 (" TPA") allows two or more industry competitors to collectively negotiate terms and conditions of an agreement with a supplier or customer. A group of businesses can obtain immunity from legal action under the TPA for anti-competitive conduct, provided they lodge an application notifying the ACCC of the arrangement.

However the ACCC's notification register suggests that businesses are failing to utilise the competitive advantages and protections the mechanism provides.

Background: Authorisation and Notification processes

Businesses have two pathways by which they can obtain ACCC approval and statutory protection when engaging in collective bargaining.

Authorisation

Under s 88 of the Trade Practices Act (1974) , the ACCC may authorise businesses to engage in anti-competitive conduct, if it is satisfied that 'the public benefit of the arrangement outweighs any public detriment'. [2]

Under the old scheme, businesses applying for ACCC authorisation to engage in collective bargaining arrangements were subjected to a complex system involving considerable cost and delay. In considering applications for authorisation, the ACCC conducted public consultations to assess the public benefit of permitting the anti-competitive conduct. . This process took up to 6 months.

Amendments to the TPA in 2006 streamlined the process, allowing applicants to apply for interim authorisation or draft determination to permit parties to being collective negotiations whilst the ACCC conducts assessment. Both interim authorisation and draft determinations are delivered to applicants within 28 days of application. ACCC now aims to issue final determinations within 3 months; [3] the Commission will either grant authorisation, place conditions on authorisation or deny authorisation.

Notification

Collective bargaining notification process was introduced in 2007 and is specifically designed for small businesses to obtain legal immunity under the TPA for collective bargaining, as an alternative to the still lengthy "authorisation" process.

Under s 45(8A)(a), a corporation is not prohibited from entering an arrangement that may substantially lessen competition if notice is given to the ACCC pursuant to s 93AB(1). Section 93AB(1) outlines the steps required in notifying the ACCC of a collective bargaining arrangement. To lodge a collective bargaining notification, each party must consent to the application being lodged and guarantee that the total expected value of the transactions it will conduct under the arrangement will not exceed $3 million, within a 12 month period.

In assessing a notification application, the ACCC will contact all interested parties, and invite submissions on the proposed collective arrangement. As with the authorisation process, the ACCC will compare the public benefits against public detriment. If the application is successful, statutory immunity begins after 14 days after valid lodgement of the notification, and lasts for 3 years. The ACCC has the capacity to revoke immunities; decisions to revoke can also be reviewed by the Australian Competition Tribunal. [4]

Notification Register highlights poor small business utilisation

The ACCC records the outcome of all collective bargaining notifications in the Notification Register. [5] Since its inception, only 10 applicants have lodged notifications, indicating that businesses are not taking advantage of the potential benefits of the process.

The following table outlines the types of notification collective bargaining applications lodged with the ACCC and their outcome from 2007 to present.

Year	Allowed to stand	Withdrawn	Revoked	Types of bargaining arrangements in notifications allowed to stand
2007	3	1	1	1. Australian Newsagents' Federation Limited: CB00003 : Australian Newsagents' Federation negotiated contracts on behalf of its Western Australian members with the publisher West Australian Newspapers; 2. The Wangaratta Anaesthetic Group (WAG): CB00006 : group of anaesthetists negotiated anaesthesia fees with HBA. 3. Nelson Enterprises Pty Ltd & Ors: CB00001 & CB00002 : 3 Queensland citrus growers negotiated price and quantity of citrus supply to Woolworths Ltd and IGA Ltd.
2008	4	-	-	1. R J Nuss Removals Pty Ltd: CB00007 : R J Nuss Removals represented a group of removalists negotiating an annual growth rebate for rail linehaul services with Asciano Service Pty Ltd. 2. BFC Stores Pty Ltd & Ors: CB00009 - CB00056 : BFC Stores negotiated on behalf of BFC owned and franchise owned stores with 48 target companies regarding the price stores could purchase products for on-supply to Australian consumers. 3. Australian Independent Record Labels Association Ltd: CB00059 - CB00066 : AIR collectively bargained on behalf of members including Telstra, Optus, Foxtel, MTV regarding licensing of its members audio and visual rights in respect to transmission of public performances and music videos. 4. ClubsNSW: CB00057 & CB00058 : ClubsNSW bargained on behalf of 332 members with TabCorp Holdings Ltd and Sky Channel Pty Ltd in relation to terms and conditions of the supply of wagering and racing broadcast services.
2009 (as at March)	2	-	-	1. E Dobson Pty Ltd & Ors: CB00067 - CB00069 : applicants lodged notifications on behalf of Wizard Home Loans franchisees to negotiate terms of franchise agreements with GE Money and Aussie. 2. South Australian Farmers' Federation: CB00070 : SAFF applied on behalf of 18 South Australian chicken growers to negotiate terms and conditions of growing contracts with Inghams Enterprises Pty Ltd.

Implications: who can benefit from lodging collective bargaining notifications

Collective bargaining notifications are suitable across a vast range of businesses and industries. The process can lead to considerable benefits for:

• Franchising;
• Industry Associations acting on behalf of members ranging from agriculture to the retail, manufacturing and service industries;
• Clubs and Societies; and
• Professional organisations.

Benefits include:

• Transactional costs savings;
• Improvements in information access for both parties;
• Increased input into contracts and negotiation;
• Facilitation of market dynamics; and
• Ability to negotiate volume discounts and for better pricing.

This mechanism may be suitable for collective negotiations regarding:

• Franchise agreements;
• Licensing agreements;
• Distributorship agreements;
• Supply/purchase agreements; and
• Contract terms and conditions (including pricing).

Stephens Lawyers & Consultants have a high level of expertise in trade practices and competition law. Our lawyers represent leading companies in both litigious and commercial matters, and have significant experience in writing submissions to government on behalf of clients.

For further information contact:

Stephens Lawyers & Consultants

Level 3, 530 Lonsdale Street

Melbourne VIC 3000

Phone: (03) 8636 9100

Fax: (03) 8636 9199

Email: stephens@stephens.com.au

Website: www.stephens.com.au

All Correspondence to:

PO Box 13286

Melbourne Law Courts

Melbourne VIC 8010

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© Stephens Lawyers & Consultants, March 2009.

Researched and written by Colette Downie, edited by Katarina Klaric.

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