Collective bargaining by small businesses - one year on

In December 2006, Federal Parliament passed Amendments to the Trade Practices Act (TPA) designed to make it easier for small businesses to engage in collective bargaining.

The Amendments were sold as providing an opportunity for groups of disempowered small businesses to counteract inequality of bargaining power. However, despite the hype, in practice the provisions were not designed to counteract the power imbalance. Instead the changes allow collective bargaining to take place more easily in cases where a benefit to consumers can be demonstrated. Consumer benefit and redressing power imbalance are quite different things.

The changes made to the TPA did not create new rights for small businesses to engage in collective bargaining. The TPA already contained a complicated authorisation process under which parties could seek ACCC authorisation to engage in collective bargaining free from potential TPA liability. The Amendments streamlined this process. The requirement to seek approval was reversed.

For arrangements involving small transaction values, collective bargaining can proceed after notification to the ACCC, unless the ACCC objects. Crucially, however there was no alteration to the substance of grounds on which the ACCC may object. The ACCC must weigh the public benefit to be gained from the proposed conduct against the likely detriment resulting from decreased competition among the members of the collective. Public benefit means the benefit to consumers. It does not include the private benefit to be gained by an individual through improving their working conditions, increasing their pay or correcting any power imbalance.

In industrial relations, individual employees are considered to be inherently unequal with their employers. It follows that collective bargaining assists in redressing this imbalance. In practice, some collectives will be stronger than others, but this does not challenge the underlying assumption of inequality.

In the trade practices context however, the underlying assumption is that all individual operators are equal. Where a collective lodges a notification of their intention to engage in collective bargaining, they must establish inequality and prove public benefit to the consumer through lower prices, increased or better services or greater efficiency.

Collective bargaining in the trade practices context cannot be viewed through the prism of employee collective bargaining. The objectives are fundamentally different.

After 12 months of the operation of the new sections only six notifications have been made to the ACCC. Three were allowed to stand, two were rejected and one remains under consideration.

The two rejected notifications involved applications by the Australian Medical Association (AMA) on behalf of contractor doctors in Victoria to bargain collectively with hospitals over their working conditions. They illustrate the difficulties in practice of the operation of the public benefit test.

The doctors are visiting medical officers at two hospitals in Victoria. Both groups sought to enter into collective arrangements with their respective hospitals covering the price of their services, rostering arrangements and out of hours coverage. The applications were supported by the relevant hospitals but opposed by the Victorian Department of Human Services. As they were not employed by the hospitals, the doctors could not bargain under the workplace relations system.

This meant that in order to engage in collective bargaining they had to prove to the ACCC that any anti competitive effects from forming a bargaining group and limiting competition against each other would be outweighed by the benefit to consumers that would flow from the arrangement. This was always going to be extremely difficult.

First, they had to provide evidence of lower costs to consumers and internal efficiencies, factors that were generally within the control of the hospital not the doctors.

Second, existing labour market shortages operated against their application because it suggested an existing degree of individual market power. This was the case even though the evidence suggested that in practice there was little actual negotiation over the cost of their services.

Finally, evidence of increased control over working conditions was not relevant to the assessment because it does not constitute a public benefit.

The La Trobe doctors application to engage in collective bargaining demonstrates the shortcomings of using competition law principles to resolve disputes over labour supply. In beginning from the assumption that all service providers are equal with their engagers and ignoring private benefit, the TPA provisions discount all of the actual benefits contractors can realise through bargaining. Further contractors reliant on their own labour will face a difficult argument in times of tight labour supply regardless of whether negotiation takes place in practice.

These difficulties faced by the Victorian doctors will also be experienced by any small businesses unable to control either the eventual price paid by the consumer or downstream efficiencies.

If the ALP is seriously committed to counteracting inequality of bargaining power for small businesses it must revisit the concept of public benefit in the TPA notification process. It should, at least, include consideration of the private welfare of the members of the bargaining unit as a relevant factor.