Collective Bargaining and the Trade Practices Act: The Trade Practices

Legislation Amendment Act (No 1) 2006 (Cth) — (2007) 20 AJLL 207

Copy Citation
Australian Journal of Labour Law
Shae McCrystal
Legislative Developments
Collective Bargaining and the Trade Practices Act: The Trade Practices
Legislation Amendment Act (No 1) 2006 (Cth)

Shae McCrystal*

The use of collective bargaining as a tool to improve the economic and working
conditions of individuals has generally been utilised by employed workers organised
within trade unions. The traditional hostility of the common law to combination was
countered through the passage of industrial relations legislation which allowed for
lawful combination and established structures for the pursuit of common working
conditions. In Australia this has taken the form of legislation providing for the
conciliation and arbitration of industrial disputes and, more recently, structures for
collective bargaining.
In contrast, collective bargaining in the commercial context, for example by
corporations, self employed persons or independent contractors, has remained
unlawful because of the anti-competitive effect of combination by such individuals or
corporations. The use of collectives to bargain over the price of services, products or
conditions of business is generally unlawful under the anti-competitive conduct
provisions in Pt IV of the Trade Practices Act 1974 (Cth) (TPA) (and the identical
provisions applying to individuals under the National Competition Code). While it has
been possible under the TPA to obtain authorisations to collectively bargain in
contravention of Pt IV, this process is lengthy, often difficult and time consuming,
rendering access to collective bargaining difficult for most small commercial
operators. The combination of these factors has meant that collective bargaining has
not been available to non-employed workers economically dependent on the sale of
their labour (for example, independent contractors and self employed persons) as a
tool to improve their economic and working conditions.
The ability of non-employed workers to engage in collective bargaining has
significantly increased with the passage of legislation which I discussed (in proposed
form) in an article in this Journal,1 the Trade Practices Legislation Amendment Act
(No 1) 2006 (Cth) (Amendment Act). The Amendment Act has altered the TPA,
supplementing the existing authorisation process with a new notification process
which permits relevant individuals2 or corporations to lodge a ‘collective bargaining
notice’ with the Australian Competition and Consumer Commission (ACCC) of their
intention to engage in collective bargaining with a named target. Once in force, such a
notice protects the parties engaged in collective bargaining from Pt IV liability with
respect to collective boycotts, price fixing or contracts, arrangements or
understandings which may substantially lessen competition.
The passage of these amendments to the TPA was not specifically targeted at
non-employed workers who are economically dependent on the sale of their labour,
but at ‘small business’ more generally. However, the provisions, when taken in
combination with the Independent Contractors Act 2006 (Cth) (ICA), have changed
the regulatory environment in which these workers operate.3 They remain
substantially excluded from the industrial relations system and indeed, the ICA
prevents their further regulation under state industrial legislation. However, the ICA
provides a jurisdiction to challenge unfair services contracts,4 and the TPA changes
enhance the capacity of these workers to engage in collective bargaining. While this
change is embryonic, it has the potential to challenge the assumption that all
non-employed workers operate in an arms length commercial environment, presenting
the opportunity for a significant change in the regulation of their working conditions.
Consequently, it is worthy of attention in the labour law context. The irony of this
development, coming at a time when individual bargaining in employment is
championed and assumptions of inherent power imbalance are challenged, has been
noted elsewhere.5
This legislative note will briefly examine the legislative history of the Amendment
Act before analysing the substance of the changes.
Legislative History
The collective bargaining notification provisions were recommended by Dawson et
al’s Review of the Competition Provisions of the Trade Practices Act in 2003
(Dawson Report).6 The report concluded that the anti-competitive conduct provisions
in Pt IV of the TPA largely prevent ‘collective’ conduct by small businesses in their
dealings with larger businesses and acknowledged that collective activity could be
pro-competitive if it corrected an imbalance of bargaining power in certain
situations.The Dawson Report recommended the introduction of a notification process
for collective bargaining by small businesses dealing with large businesses in
circumstances where such bargaining could generate public benefit.7
The recommendations of the Dawson Report with respect to collective bargaining and
other aspects of the anti-competitive conduct provisions of the TPA were largely
adopted by the Federal Government and introduced into Federal Parliament in the
Trade Practices Legislation Amendment Bill (No 1) 2005 (Cth). The Bill passed the
House of Representatives but was the subject of difficulty in the Senate, due to
concern expressed by some government Senators over provisions regulating mergers
contained in one of the Schedules.8 The content of the Bill relating to mergers was
renegotiated and finally passed through Federal Parliament in late 2006. The
amendments to the TPA took effect from 1 January 2007.9
Collective Bargaining Notifications
Collective bargaining by non-employed workers undertaken to regulate their
relationships with the purchasers of their labour could potentially contravene TPA
s 45(2) in three ways.10 First, an agreement between the collective could constitute a
collective boycott of the target if they collectively refuse to deal with the
target.11 Further, it could constitute price fixing if they seek to set the price at which
each of the members of the collective will sell services to the target.12 Finally, the
conduct could constitute a contract, arrangement or understanding that substantially
lessens competition either in the market in which the members of the collective
operate, or in the market in which the target operates.13 The new notification scheme
for collective bargaining enables parties to lodge a notice of such conduct with the
ACCC. The conduct can then proceed without attracting TPA liability for these
offences.
Collective bargaining notices
Under the TPA as amended, s 45(2) does not apply to a corporation (or individual via
the NCC) engaging in conduct that contravenes the section if a collective bargaining
notice is in force.14 A collective bargaining notice is a notice given to the ACCC by
an applicant that they have made, or propose to make, a contract with one or more
persons about the supply or acquisition of goods or services to or from a ‘target’; and
that they reasonably expect that they will make one or more contracts with the target
about the supply or acquisition of goods or services.15 Here, the person giving the
notice to the ACCC has formed, or intends to form, a collective of two or more
persons or entities to collectively negotiate with a third person, the target, over the
conditions of the transactions that each of the members of the collective has with the
target.
Who may lodge a collective bargaining notice?
A collective bargaining notice may be lodged by a corporation or person on behalf of
an identified collective that satisfies the requirements above (is proposing to engage in
collective bargaining) where the corporation or person reasonably expects that the
contract to be made with the target, or the combined sum of the contracts to be made
with the target, for the supply or acquisition of goods or services, will not exceed
$3 million, or such other amount as prescribed by the regulations, in any 12 month
period.16 This provision limits access to collective bargaining notices to ‘small
business’ bargaining transactions involving relatively small contract prices.
The Guide to Collective Bargaining Notifications produced by the ACCC (ACCC
Guide) notes that in calculating the likely transaction cost of the proposed contract or
contracts with the target, businesses can utilise information such as their own past
dealings with the target or information relating to other businesses transactions with
the target.17
In order for a collective bargaining notice to be valid, the lodging party must have a
reasonable expectation at the time of making the agreement with the other members
of the collective, and at the point of lodgment, that an agreement will be reached with
the target, and that the sum of the prices under the agreement with the target will not
exceed $3 million.18 This requirement means that parties wishing to utilise this
process cannot lodge a purely speculative collective bargaining notice. They must
reasonably expect the creation of an agreement with the target. In this respect the
system established under the TPA differs from collective bargaining by employees
under the Workplace Relations Act 1996 (Cth) (WR Act) which imposes no such
substantive requirement upon employee collective bargaining.
The further requirements for the lodgment of a collective bargaining notice are that
the notice complies with the form prescribed by the regulations, contains the relevant
information and is accompanied by the prescribed fee. The prescribed fee has been set
at $1000.19
A notice will be invalid if it is given on behalf of the bargaining parties by a trade
union, an officer of a trade union or a person acting at the direction of a trade
union.20 The inclusion of this provision was not a recommendation of the Dawson
Report and appears to have been included in consequence of the strong anti-trade
union inclination of the federal coalition government.The ACCC guide points out that
applications may be lodged by an organisation acting on behalf of the collective
bargaining group, like an industry organisation, but may not be lodged by a trade
union.21 The exact effect of the provision remains unclear.It clearly operates to
invalidate a notice lodged by, or by a person acting on behalf of, a trade union, but it
does not appear to extend to invalidating a notice prepared by, or in conjunction with,
a trade union if the notice is not lodged by, or on behalf of, that trade union. Therefore
it does not appear to exclude trade union involvement, just trade union lodgment. The
provision is unfortunate as the aim of the section appears to be to exclude
involvement of trade unions in the process of collective bargaining, one in which they
are uniquely positioned to provide assistance to independent contractors or small
businesses seeking to navigate collective bargaining procedures.22 Whether it
actually has this effect in practice, given the difference between assisting a collective
to prepare an application, and actually lodging an application, is questionable.
It is unlikely that this provision will be retained in the TPA if the Australian Labor
Party (ALP) gains office at the next federal election. ALP members of Federal
Parliament expressed vociferous opposition to the section during parliamentary
debates.23 Further, the ALP policy statement on small business and contractors
passed at the 2007 ALP National Conference refers to the need for small business and
contractors to have ‘choice as to who represents them in collective bargaining’.24
The notification form that must be used for lodging a collective bargaining notice is
set out in Sch 1 of the Trade Practices Regulations 1974 (Cth). Form GA must be
completed by applicants proposing to engage in collective bargaining arrangements.
The form requires the applicants to set out the details of the proposed or existing
collective arrangement, the process of bargaining and details of the expected
outcomes from bargaining. The form also requires the applicants to detail the possible
anti and pro competitive effects of the proposed conduct by outlining the public
detriments and benefits of the conduct. Here, collective bargaining in the commercial
context differs from the employment context where collective bargaining begins from
the premise that the bargaining parties are inherently unequal.This presumption has
not been imported for commercial actors. The necessity of collective bargaining and
the public, as opposed to private, benefit from the conduct must be clearly articulated.
This requirement has previously been a stumbling block to authorisation applications
for collective bargaining. The ACCC Guide provides examples of public benefit and
detriment and indicates that the ACCC will assist parties to identify these factors.
Once a collective bargaining notice is lodged, the ACCC will undertake a public
consultation process in order to assess the pro and anti-competitive effects of the
proposed arrangement.25 A collective bargaining notice will come into effect 14 days
from the day that the notice is lodged unless the ACCC objects to the
notification.26 Once in force a notice will apply for three years unless it is withdrawn
earlier or the ACCC issues an objection notice.27
ACCC conference and objection notice
After the lodgment of a collective bargaining notice, the ACCC may ‘object’ to the
notice on the grounds that the public detriment from the proposed conduct would
outweigh any public benefit.Where the ACCC objects to a notice, it must convene a
conference to discuss the objection, and that conference must involve the applicants
and any interested persons.28 The conference provides an opportunity for the
applicants and other interested persons to discuss the pro and anti- competitive effects
of the proposed conduct with the ACCC. After the conference has been convened, the
ACCC may issue an objection notice if it is satisfied that any public benefit from a
proposed collective boycott or price fixing arrangement is outweighed by the likely
public detriment.29 Where the conduct disclosed by the notice is a contract,
arrangement or understanding that may substantially lessen competition, the ACCC
may only issue an objection notice if it is satisfied that the contract, arrangement or
understanding would actually have the effect of substantially lessening competition
and any public benefit of the conduct is likely to be outweighed by the public
detriment of the conduct.30 Where an objection notice is issued, the collective
bargaining notification will not come into force.31 An applicant may appeal an
objection notice to the Australian Competition Tribunal which must set the notice
aside if it is satisfied that the public benefit outweighs the public detriment of the
conduct.32 In the case of contracts, arrangements or understandings that substantially
lessen competition, the tribunal must set aside the notice if it is satisfied that the
contract, arrangement or understanding does not or would not have the effect of
substantially lessening competition, or, if it is satisfied that in all the circumstances
the provision would result in a public benefit which would outweigh any public
detriment.33
Where an application is successful and a collective bargaining notification comes into
effect, the ACCC retains the power to review the notice during the period of its
operation and issue an objection notice.34 If this occurs, immunity from liability
under s 45(2) of the TPA ceases on the 31st day after the issuing of the notice, or on
such other day as the ACCC specifies.35
Impact of the Amendment Act
In an earlier analysis in this Journal I argued that the introduction of collective
bargaining notifications had the potential to significantly increase access to collective
bargaining for workers who are not employed, but who are economically dependent
on the sale of their own labour.36However, I also noted that the proposed
amendments did not go far enough in providing immunity for bargaining parties from
common law actions including the economic torts, the doctrine of restraint of trade,
potential liability under the secondary boycott provisions of the TPA, or in setting out
a process whereby collective agreements could be registered and
enforced.37 Collective bargaining by commercial actors has the potential to face legal
difficulties in all these areas, and this has not been addressed in the Amendment Act.
In addition to these problems, there are manifest difficulties with the process for
collective bargaining notices which may restrict the potential usefulness of this
process, particularly for the workers under discussion.
The first problem lies in the assessment of each notification by the ACCC on the
grounds of public detriment and public benefit. In making this assessment, the private
benefit to be gained by the parties to bargaining is not relevant. Accordingly, workers
economically dependent on the sale of their labour cannot point to a betterment of
their own personal circumstances as a manifest benefit of the conduct. Instead, the
application must demonstrate that the proposal would produce a public benefit in the
form of reduced transaction costs, increased efficiency or output, improved
informational asymmetry and improved competition through the development of new
markets. Benefits to the working conditions of the members of the collective
constitute a private benefit and are not a relevant consideration. Further, the ACCC
Guide specifically notes that ‘increased fairness’ or ‘improved industrial harmony’ are
generally not sufficient to demonstrate public benefit.38 The emphasis must be on the
ultimate consumers in a production or service chain and the effect on the market. For
non-employed workers who are economically dependent on the sale of their labour,
demonstrations of public benefit may be extremely difficult to make out where the
aim is to increase the price they receive for their labour. Increased efficiencies may
not be relevant or may be offset by increased costs, making it difficult to show any net
public benefit. Further, it would not be sufficient to argue that the conduct operates to
counteract power imbalance without further evidence of public benefit, as according
to the ACCC, ‘a mere change in the amount of bargaining power is not in itself a
public benefit’.39
An additional stumbling block is the requirement of ‘reasonable expectation’ within
the lodgment process. To lodge a collective bargaining notification, the applicants
must have a reasonable expectation of creating a contract with the target of the
bargaining. As noted above, this provision appears to have been included to prevent
purely speculative conduct on the part of collectives. However, it could also operate
as a barrier to bargaining for collectives. It is a requirement under the TPA for a target
of bargaining to be given a copy of the notification as soon as practical. Would an
unconditional statement on the part of a target to the effect that they will refuse to
enter into any agreement with the collective automatically derail a collective
bargaining notification? Issuing a statement to this effect suggests that the applicants
could not have a reasonable expectation of creating an agreement and therefore could
not proceed with the notification.
If this interpretation of the provisions is correct, the potential for the notification
system to assist in evening bargaining power between parties could be undermined
before any notification even came into effect. In the employment context, it is
recognised that collective pressure may legitimately be brought to bear in order to
convince a ‘target’ to engage in negotiations. The TPA bargaining model does not
appear to allow for such a situation where a target is unwilling to negotiate, and an
applicant cannot establish a ‘reasonable expectation’. This aspect of the legislation
has the potential to undermine the utility of the provisions in achieving any balance in
bargaining power between the collective and the target of the bargaining.
In addition to difficulties in establishing public benefit and the requirement of
reasonable expectation, collectives who propose to engage in a collective boycott face
more onerous scrutiny from the ACCC. For non-employed workers who are
economically dependent on the sale of their own labour, a collective boycott is the
equivalent of the right to strike for employees: it may be the only leverage that they
are able to bring to bear in a bargaining situation. However, the ACCC Guide
specifically notes that collective boycotts can significantly increase the
anti-competitive effects of collective bargaining and as such ‘it is unlikely to allow
protection from legal action to such conduct in most cases’.40 The success of any
notification involving a collective boycott would ‘be contingent on it being clear that
a failure to collectively negotiate would result in inefficiencies’.41 This view of the
manifest public detriment resulting from collective boycott activities is also reflected
in decisions of the Australian Competition Tribunal.42 This limitation on when
collectives can take positive action (a boycott) rather than passive negotiations will
have the effect of limiting the utility of collective bargaining notices for collectives
who are otherwise unable to bring any pressure to bear on the target of their action.
The problems with the notification process that have been discussed so far are clearly
contingent on the approach that will ultimately be adopted by the ACCC to collective
bargaining notifications. The Amendment Act affected a shift from an authorisation
process where applications had to be approved by the ACCC, to one whereby
notifications will come into effect unless the ACCC objects. In practice this means
that the extent to which the problems surrounding reasonable expectation, public
benefit and collective boycotts will impact upon the capacity of workers using the
provisions to engage in collective bargaining will depend on how vigilant the ACCC
is in vetting notifications, and how inflexibly it (and the Australian Competition
Tribunal on appeal) applies these requirements. While the stringency of the approach
of the ACCC cannot yet be ascertained, the ACCC Guide suggests that the ACCC
intends to assess all notifications for validity, and asserts that notifications that
include collective boycotts will be ‘unlikely’ to succeed in most cases.43
 A more general difficulty with the notification process that has become evident since
the passage of the Amendment Act is the lack of public dissemination of information
on the new procedures. At the time of writing (July 2007) the ACCC notification
register records that there have been no notifications lodged for consideration. Further,
there has only been a limited newspaper public education campaign to raise awareness
of the notification scheme. The availability of collective bargaining for businesses
outside the employment context is not generally known. In order to ensure that the
provisions are utilised to the fullest, there must be a more extensive public awareness
campaign in order to shift the mindset that collective bargaining is just for employees.
Conclusion
The collective bargaining notification scheme introduced by the Trade Practices
Legislation Amendment Act (No 1) 2006 (Cth) has the potential to expand access to
collective bargaining as an option for many workers who are not employed but are
economically dependent on the sale of their own labour. However, the requirement
that parties establish and detail the ‘public benefit’ to be gained from the conduct may
operate as a stumbling block to successful notifications by these workers. Further, the
predominant view of the ACCC and Australian Competition Tribunal that there is no
public benefit in increasing bargaining power, and that collective boycotts are
significantly anti-competitive may operate to reduce the utility of collective
bargaining notifications.
The federal coalition government has asserted that collective bargaining notifications
are necessary to make it easier for small business to collectively bargain with big
business.44 The ALP opposition has asserted the need for collective bargaining
notifications to operate to assist in redressing power imbalances between small and
large businesses.45 However, the limitations that I have outlined in this note,
particularly with respect to the exclusion of private welfare as a component of public
benefit, the requirement that an applicant have a reasonable expectation of creating an
agreement before commencing bargaining, and the failure to recognise a correction of
bargaining power as a public benefit means that the notification scheme will be of
least benefit to those with the weakest bargaining power. These applicants will be
least able to demonstrate public benefit as they will be unable to include their private
welfare or weak bargaining position as a benefit. Further, they will be least able to
demonstrate a reasonable expectation of completing an agreement in the face of a
refusal to bargain by a target and will be unable to utilise a collective boycott for the
purposes of attempting to convince a target to enter into an agreement.
As both the federal coalition government and the ALP have publicly professed a
commitment to permitting collective bargaining by small business to assist in
counteracting power imbalance, amendment to the concept of public benefit for the
purposes of collective bargaining notifications is necessary. Further, the concept of
‘reasonable expectation’ should be repealed or, at least, modified to ensure that where
there is a power imbalance, the notification provisions can be utilised to bring
pressure on a target in order to encourage that target to agree to engage in bargaining.
These changes would ensure that the new provisions are not only utilised by
organisations that can demonstrate efficiency gains and the potential to open up new
markets, but are also utilised by workers who are economically dependent on the sale
of their labour.
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ANU College of Law, ANU.
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