by Eddie Oczkowski

The Federal Government has finally introduced legislation to amend the Trade Practices Act (TPA) to make it easier for small businesses and farmers to collectively negotiate over sale conditions for goods and services with larger organisations. The legislation proposes that rather than an authorisation, only a notification to the Australian Competition and Consumer Commission (ACCC) is needed to permit collective bargaining. Authorisations are more costly and involved than notifications. Notifications should provide a speedier, simpler and less expensive mechanism. The ACCC is currently drafting up guidelines to support the notification process.

This legislation signifies a noticeable shift in attitude and recognition of unequal bargaining power in markets for some goods and services. The Dawson Inquiry and the Senate Economics References Committee both recognise the importance and need to make it easier for small business and farmers to legally countervail market power. Further the ACCC in recent decisions for Newsagents and TAB agents now explicitly recognises that redressing unequal bargaining power in itself is in the public interest. All this evidence, points to an expectation that in the future, a greater number of small businesses and farmers will form collective groups in the hope to countervail market power.

In essence, the concept of collective bargaining by small businesses and farmers with larger organisations and processors is consistent with John Kenneth Galbraith’s 'countervailing power' notion of the natural tendency of individuals to form organisations to counteract the market power of large corporations. The concept of countervailing market power is also one of the often cited principle motivations for the formation of co-operatives.

ACCC authorisations have been granted for collective bargaining for various groups such as Newsagents, TAB agents, chicken meat growers and dairy farmers. There appear to be some elements common to these authorisations. First, the ACCC stresses the concept of voluntary negotiations and the ability of processors and farmers to opt out and negotiate individually. Second, bargaining groups only appear to be permitted on a regional (milk) or state basis (chicken meat) where there is no common agent or communication between bargaining groups. These ACCC conditions appear to seek to limit any excessive amount of countervailing power.

It would appear that the success of the current authorisations is somewhat mixed. Chicken meat growers in Victoria argued against the authorisation gained by processors and successfully took the ACCC to the Federal Court to overturn its decision. The SA government modified its legislation to support its chicken growers. The NSW Farmers Association has successfully delayed the repeal of NSW poultry Act supporting chicken and turkey meat growers. Australian Dairy Farmers have expressed concerns for continuing low milk prices and the lack of commitment to bargaining. The lack of success, in part, with these groups appears to be the absence of any compulsory arbitration process and the freedom to opt out, as specified in ACCC authorisations. NSW, Vic. and SA have opted to continue to support legalisation for chicken meat growers, which facilitates compulsory mediation and arbitration in the case of disagreements. It may be the case that to improve the ability of collective groups to countervail market power (in the public interest) ACCC notifications alone, may be inadequate. A return to the use of supporting legalisation (some of which was dismantled by National Competition Policy) may be needed to give collective bargaining a better chance of success.

The compulsory aspects of the State legalisation do have its critics. For example, the National Competition Council argues that compulsory arbitration would tend to drive parties apart rather than together. Also the NCC argues that there is no reason to expect that some third party with less skills and no stake in outcomes could more accurately determine efficient prices.

The US bargaining experience in fruit and vegetable markets appears to have overcome some of these bargaining difficulties. US bargaining associations point to price improvements, more stable prices and improved market information for farmers as a result of negotiations. The common availability of arbitration in US fruit and vegetable bargaining appears to support the ongoing bargaining system. The US experience also points to the significant efficiency gains in accessing greater market information for both buyers and sellers. The ACCC has recognised this information sharing as a public benefit in authorisations. The paucity of transparent information on food pricing is a clear finding of the Federal Government commissioned food pricing report. The benefits from improved information need to gain greater currency from both buyers and sellers in the Australian market place.

In conclusion, there appears to be a commitment to the general principle of collective bargaining from political parties and regulatory authorities. In part, the need for countervailing market power has arisen because of the consequences of deregulation resulting from National Competition Policy. Voluntary bargaining co-operatives and associations are in a better position to develop as a consequence of introduced legislative changes for collective negotiations. Some of the recent experiences of existing bargaining groups point to a concern for a lack of commitment to the negotiation process. This raises some concerns about the likely success of the ACCC notification system in isolation without the support of some compulsory mediation and arbitration system.