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On 3 June 2021, the much-anticipated class exemption for small businesses, franchisees and fuel retailers came into effect.
The class exemption allows any small business with an aggregate turnover of less than $10 million in the previous financial year to collectively negotiate the terms and conditions of acquisition including price with suppliers, processors, franchisors and fuel wholesalers.
Such conduct can be engaged in without contravening competition laws (which otherwise prohibit agreements between competitors to acquire at the same price) on the basis that the benefits of this conduct in addressing imbalances in bargaining power and achieving cost and time savings outweigh the anti-competitive detriments.
The monetary threshold does not apply to franchisees and fuel retailers.
Eligible negotiating groups can obtain immunity from competition law by submitting a basic form with the ACCC. Once lodged, immunity automatically commences and will remain in effect until 30 June 2030.
The ACCC however can withdraw the class exemption from particular businesses if it forms the view that the collective bargaining conduct by those businesses substantially lessens competition and is not likely to result in overall public benefits. The class exemption is also not available to collective bargaining arrangements for which the ACCC has previously denied or revoked authorisation, or revoked a notification.
All completed notices will be published on the ACCC’s public register.
For businesses that do not fall within the monetary thresholds applying to the class exemption, authorisation and notification of collective bargaining conduct is still available.
The class exemption is not compulsory, and does not require suppliers, processors or fuel wholesalers to negotiate with the group of small businesses if they do not wish to do so. It also does not compel any small business, franchisee or fuel retailer to be a part of a collective bargaining group.
This means it is open to the supplier, processor or fuel wholesaler to negotiate individually with each of these parties and not enter any collective negotiation at all. In essence, a “divide and conquer” strategy may reap more benefits than collective negotiation.
Of course, negotiating with the group may achieve cost and time savings and may streamline any negotiating process. Accordingly suppliers, processors and fuel wholesalers should weigh up these benefits against the risks of agreeing to less favourable terms across the board.
Importantly, the class exemption does not allow small businesses, franchisees or fuel retailers to boycott or threaten to boycott a corporation unless the corporation engages in collective negotiation. Suppliers, processors and fuel wholesalers should watch out for any such conduct, which will still be illegal under the law.
Similarly, small businesses, franchisees or fuel retailers are only exempt to the extent they are collectively negotiating terms and conditions with the other party. They are not exempt from sharing other commercially sensitive information (separate to the collective negotiation) such as their own acquisition prices or customer strategies. Suppliers, processors and fuel wholesalers should watch out for any such conduct (which will still be illegal under the law).
You should undertake the following steps now in preparation for the new class exemption:
Regardless of the approach you take to any request for collective negotiation, you should train relevant staff to ensure they are understand the parameters of the conduct that small businesses, franchisees or fuel retailers can and cannot engage in.
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