This post concludes a symposium on Root and Branch Reconstruction in Antitrust. Read the rest of the symposium here.
As in many common law countries around the world, Australian law maintains a clear statutory divide between the regulation of “employee” labor markets, and markets for “goods and services.”
Most Australian employees have access to the benefits of economic coordination through mechanisms for collective bargaining set out within the Fair Work Act 2009, and in the pursuit of the collective regulation of the terms and conditions of their employment, they are expressly exempted from the operation of competition laws. They can engage in collective bargaining and strike action without potential legal liability under either the common law or competition law, but these protections do not extend to secondary boycott conduct, which remains prohibited for employees under competition law.
By contrast, economic coordination outside of the corporate form by self-employed workers, agricultural cooperatives, small businesses, and franchisees is subject to the Competition and Consumer Act 2010(Cth) (CC Act). This Act expressly outlaws what is referred to as “cartel conduct” by those who would otherwise be in competition with each other, including practices such as price fixing, bid rigging, territorial allocation, boycotts, and “concerted practices” encompassing anti-competitive information sharing. Most of these are outlawed “per se,” with no evidence required of any anti-competitive impact in practice.
This outlawing of “cartel conduct” under the CC Act is in keeping with the underlying articles of faith of modern competition law policy – that collusion between parties that would otherwise be competitors within the same market for goods and services is inherently anti-competitive, creating inefficient outcomes, driving higher prices and lower quality services.
However, this has never been the whole story of modern Australian competition law for small economic actors.
In the early 1970’s, around the same time as the predecessor provisions to the modern cartel provisions were introduced, a Statutory authorization process was enacted to allow the competition regulator (now the Australian Competition and Consumer Commission (ACCC)) to allow conduct to proceed that would otherwise breach those provisions, where that conduct was of demonstrable “public benefit.” This process recognized that some cooperative arrangements between competitor businesses can produce benefits that outweigh any purported anti-competitive effect.
In 2007, the authorization process was supplemented by a “notification” provision, whereby groups of small economic players could “notify” their intention to the ACCC to engage in conduct which might otherwise breach the cartel provisions, and the conduct could proceed unless the ACCC objected. This notification provision was introduced with the express intention of facilitating access to collective bargaining for small business actors, because it was believed that the complexities and expense involved with the authorization process were hindering their efforts in this respect.
In June 2021, the ACCC made it significantly easier for small economic players to bargain collectively with the introduction of a “class exemption” from the majority of the cartel provisions. The class exemption was made under a statutory class exemption power that the ACCC had successfully lobbied to have included in the CC Act, and which Parliament had introduced in 2017. Under the class exemption, eligible small businesses (those with an aggregated turnover of less than $10 million in the preceding year) can form a bargaining group and negotiate with suppliers or customers in respect of the supply or acquisition of goods or services, without breaching the majority of the cartel provisions (but not prohibitions on primary or secondary boycotts). The same applies to groups of franchisees negotiating with a common franchisor; or fuel retailers negotiating with common fuel suppliers.
The underpinning rationale for the class exemption is net public benefit. This is the idea that collective bargaining by the small businesses will generate “net public benefit” such that the potential public benefits will not only cancel out any anti-competitive detriment, but have public benefit “left over.”
The concept of “public benefit” is not defined in the CC Act. It was defined by the Federal Court of Australia in Re Queensland Co-Op Milling Association Ltd (1976) 25 FLR 169 as “anything of value to the community generally, any contribution to the aims pursued by society including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress.” Any benefits that are claimed must be substantial, must be directly referable to the relevant conduct, and cannot otherwise be available without the conduct.
In practice, the assessment of what will or will not be a public benefit has been refined over decades of authorization and notification assessments by the ACCC. The test encompasses both economic benefits produced through efficiency outcomes driven by collective negotiation, and benefits of a non-economic nature or “public goods.”
The ACCC has accepted a range of economic efficiencies that are created through collective bargaining by small economic players with larger economic entities. For instance, the ACCC has consistently found that, in acting collectively, these groups can create better contract outcomes through input into previously standard form contracts; through reduced information asymmetry; and through the reduction of barriers to market entry. Such gains can lead to better services and choices for consumers, even where they may potentially be accompanied by some price increases. Economic gains are also said to arise through the pooling of resources and the sharing of costs (such as the cost of legal advice).
Non-economic benefits are less tangible, and almost always context specific. For example, in an authorization decision involving medical professionals, the ACCC accepted improved public access to health care services as a public benefit; and in a case involving translators providing interpretation and translation services in medical and judicial contexts, they recognized the public benefits of a trained and stable workforce.
What is so significant about the class exemption is the recognition by the ACCC that public benefits flow from horizontal coordination by small economic players, without requiring this to be established or defended every time collective bargaining by these players is proposed. All small economic players who fall within the scope of the exemption have the capacity to seek to engage collectively with the larger businesses with whom they contract, and the underlying assumption is that such engagement will drive public benefits.
Now, before getting too excited about this acknowledgement by the Australian competition regulator that collective bargaining can drive public benefits, the shortcomings of the class exemption must also be understood.
The most significant shortcoming of the class exemption is the failure to include either primary or secondary boycotts in the scope of conduct permitted by the exemption. Small economic players can seek to engage in collective bargaining with a particular target (for example, freelance journalists with media companies; agricultural producers with purchasers; franchisees with the franchisor), but they cannot utilize the tools of economic coercion to bring those targets to the bargaining table. Collective outcomes can only be reached voluntarily, and therefore will only arise where dealing collectively with small economic players will suit the business needs and agendas of those targets. If potential targets do not want collectively to engage, the collective cannot refuse to contract with those targets or otherwise interfere with any existing contractual arrangements (i.e., take action akin to a strike).
The failure to include boycotts reflects the broader historical position taken by the ACCC in respect of authorization of proposed boycott conduct – under the CC Act boycotts can be permitted but almost never are. The only substantive primary boycott ever authorised by the ACCC was overturned on appeal because the perceived anti-competitive detriment was too high to be overcome by the relevant public benefit. In more recent years, the ACCC has signalled a willingness to permit boycotts in future cases because boycotts “can be a useful negotiating tool to bring the target business to the table or restart stalled negotiations”(ACCC 2018, p. 10). However, any such proposed conduct must still go through the notification or authorization process.
The other shortcomings of the exemption relate to the regulatory black hole surrounding conduct undertaken subject to the exemption. There are no legislative supports either for collective bargaining or any outcomes generated. There also exist ambiguities about the scope and application of the exemption at the margins, particularly in relation to the ability of parties within a bargaining group to share relevant information. However, despite these shortcomings, it is important to acknowledge the major leap forward represented by the class exemption. Instead of viewing coordination between small economic players with suspicion or treating it as inherently anti-competitive, the Australian competition regulator has actively permitted such conduct as productive of public good. While those of us in the labor law context have long understood the benefits of collective bargaining, this shift in competition regulation may prove to be of enormous benefit for a much wider range of small economic actors in Australia.