ACCC collective bargaining proposal to boost franchisee power

By Nick Hall | 07 Jun 2019 View comments

Franchisees may be in for stronger bargaining power and network representation under a new proposal from the Australian Competition and Consumer Commission (ACCC). The ACCC collective bargaining proposal was floated last year, but after positive results the body is looking to take the next step.

On Thursday, the ACCC announced it was seeking feedback from the small business sector on the proposed plan.

The plan would allow small businesses to collectively negotiate with their suppliers and processors. Franchisees and fuel retailers would also be able to collectively negotiate with their franchisor or fuel wholesaler, without first having to seek ACCC approval.

Additionally, all franchisees and fuel retailers covered under either the Franchising Code of Conduct or the Oil Code of Conduct would also be able to collectively negotiate with their franchisor, regardless of aggregated turnover.

Mick Keogh, ACCC deputy chair said the proposal meant less red tape for franchisees and more freedom to improve supply chain.

“Collective bargaining allows businesses to share the time and cost of negotiating contracts, and potentially gives them more of a say on contract terms and conditions,” Keogh said.

“These arrangements can also benefit the prospective business partner, because it can result in more efficient scheduling or delivery arrangements.”

The ‘class exemption’ relates to businesses with a turnover of less than $10m in the financial year, which equates to around 98.5 per cent of Australian businesses.

“This proposal would make it much simpler and less costly for eligible businesses or franchisees to collectively negotiate. However, the class exemption would not force anyone to join a collective bargaining group, or force a customer, supplier or franchisor to deal with the bargaining group if they did not want to,” Keogh said.

ACCC collective bargaining history

While the initial plan was put to the market last year, Keogh confirmed that strong franchisee support was behind the ACCC’s new move.

“Now that we have reached a preliminary view about how we think the class exemption should work, and who should be eligible to use it, we are seeking feedback on the proposal,” he said.

It’s not all smooth sailing for the proposal however, Keogh also revealed some franchisors had opposed the move.

“Some franchisors have flagged competition law concerns as a reason not to negotiate with their franchisees as a group,” Keogh said.

“This exemption would remove any legal doubt, and would ensure that all franchisees who have contracts with the same franchisor or fuel supplier could form a single collective bargaining group, with no franchisees excluded.”

Industry response

Kate Carnell, Australian Small Business and Family Enterprise Ombudsman welcomed the proposed class exemption.

“This proposal is good news for small business. It is broad-ranging and in line with our submission to the ACCC regarding this issue,” Carnell said.

“Franchisees in particular will see tangible benefits as they band together to bargain for better outcomes on pricing and contract terms.”

“This proposal makes it simpler and cheaper for eligible businesses and franchisees to collectively negotiate if they choose. It’s another important step towards levelling the playing field for small business.”