ATN #418

LAW PATH
Customers stronger together
Collectively bargaining alongside competitors can affect transport costs
NATHAN CECIL
is a partner and
JOANNE JARY is
a special counsel
at Holding
Redlich
Agroup of freight brokers made a notification
recently to the Australian Competition and
Consumer Commission (ACCC) to collectively
negotiate with freight carriers for a term of six years.
The ACCC has not objected to this notification,
meaning that, instead of having to negotiate
one-on-one with freight carriers, the freight brokers
can consolidate their bargaining power and negotiate
as a bloc.
Ordinarily, businesses requiring transport services will
negotiate one-on-one with a carrier or logistics provider.
How good a deal they get will largely depend on the
level of competition in the marketplace and the relative
bargaining power of the business vs that of the carrier or
logistics provider.
It is almost universally true that the more volume
you have to ship, the more buying power you have
and, therefore, the more bargaining power you can
exercise in negotiations – resulting in better rates or
terms of service.
WHAT IS COLLECTIVE BARGAINING?
Collective bargaining is where a number of competitor
businesses requiring transport services band together
on one side of the negotiating table, across from a single
carrier or logistics provider on the other side.
Typically, businesses seek to band together and
collectively bargain to enhance their individual buying
and bargaining power.
WHY NOT ALL COLLECTIVELY BARGAIN?
The Competition and Consumer Act 2010 (Cth)
(Act) generally requires businesses to act independently
of their competitors when making decisions such as
setting prices and terms and conditions for the provision
of services.
Collective bargaining is, therefore, generally considered
to be anti-competitive, in that competitor businesses
work together to negotiate joint price or service terms,
rather than competing with each other to extract the best
price or service terms.
Depending on the extent of such collective action, this
may constitute cartel conduct, concerted practices or
other restrictive trade practices, which may be prohibited
and punishable under the Act.
Penalties for such prohibited conduct can, if viewed as
cartel conduct, result in individuals facing either criminal
(up to 10 years jail) or civil penalties (up to $500,000 per
civil contravention). In the case of corporations, penalties
for criminal or civil contraventions can be up to $10
million and, in some cases, even higher.
HOW TO COLLECTIVELY BARGAIN
Businesses can apply to the ACCC for an exemption
from the competition provisions of the Act for collective
bargaining through either the process for authorisation
or notification.
For authorisation, depending on the nature of
the conduct to be engaged in, the ACCC may grant
authorisation where: the proposed conduct would not
be likely to substantially lessen competition; or the likely
public benefit from the conduct outweighs the likely
public detriment.
Notification is an alternative process to authorisation
for seeking legal protection to engage in collective
bargaining, which may be faster than seeking
authorisation. The ACCC will assess a notification on
whether any benefit to the public is likely to outweigh any
potential public detriment.
If authorisation is granted, or the notification is not
objected to by the ACCC, businesses that act within the
scope of that authorisation or notification cannot be
prosecuted for breach of competition laws.
WHAT HAPPENED IN THIS CASE?
The freight brokers made a notification to the ACCC to
collectively bargain with freight carriers to obtain more
favourable rates and terms that the freight brokers could
then offer to their customers.
Presumably, the freight brokers hope that the
favourable rates and terms that they are able to negotiate
will provide them with a competitive commercial
advantage over other competitors that are not part of
their collective bargaining group.
The ACCC considered that the arrangement would
be anti-competitive, in that competition between the
competitor freight brokers would be reduced by permitting
them to bargain together.
However, the ACCC further considered that the
public benefits outweighed the detriments caused by
this reduction in competition. Specifically, the ACCC
considered that the overall reduced negotiating costs and
improved (and slightly more equal) negotiating standing
obtained by the freight brokers outweighed any detriment.
The ACCC further noted that the freight brokers only
comprised a relatively small percentage of the market and
agreed to permit other freight brokers to join their group
who were otherwise forced to negotiate solo against
some very large freight carrier businesses.
Balancing the above considerations, the ACCC did not
object to the notification for the collective bargaining. The
ACCC decided to allow the notification to remain in force
for a period of six years.
42 ATN July 2021 FULLYLOADED.COM.AU