ACCC’s Perishable agricultural goods inquiry report good news for suppliers

After concluding its perishable agricultural goods inquiry, the Australian Competition and Consumer Commission has recommended key regulatory changes to protect smaller businesses from the harmful effects of bargaining power imbalances in supply chains. These recommendations include the introduction of a class exemption for small business collective bargaining and the strengthening of the small business unfair contract terms (B2B UCT) framework.

The Australian Competition and Consumer Commission’s (ACCC) three-month inquiry into bargaining power imbalances in supply chains for perishable agricultural goods concluded in November. The ACCC has released its key findings and recommendations from this inquiry in its Perishable agricultural goods inquiry report, with two recommendations likely to be of interest to greenlife industry members. 

The perishable agricultural goods (PAG) inquiry examined trading practices throughout supply chains, including the relationships between growers and retailers, and the extent to which any potential bargaining power imbalances in these relationships adversely impact the efficient operation of these markets. Recommendations in the ACCC’s inquiry report include two key regulatory changes that will provide additional protection against some harmful effects of bargaining power imbalances to members of the greenlife industry: 1) the introduction of a class exemption for small business collective bargaining, and 2) the strengthening of the small business unfair contract terms (B2B UCT) framework. 

Class Exemption  

The ACCC is currently introducing a ‘class exemption’ that will provide immediate legal protection for small businesses to engage in collective bargaining.  The ACCC says that it can be advantageous for small businesses in PAG industries to use collective bargaining as a means of negotiating better terms and conditions with larger businesses than they would otherwise achieve on their own.  

This class exemption will come into effect in early 2021, following the expiry of the Parliamentary disallowance period, and will apply to three categories of eligible businesses: 

• A business with an aggregated turnover of less than $10 million in the financial year preceding when it joins a collective bargaining group 

• Franchisees negotiating with their franchisors (regardless of turnover) 

• Fuel retailers negotiating with their fuel wholesalers (regardless of turnover). 

The ACCC says that the class exemption will allow these eligible businesses to form or join a collective bargaining group to negotiate with suppliers or customers about the supply or acquisition of goods or services. This class exemption will remove the need for these businesses to seek authorisation or lodge a notification, meaning that they could access the exemption without delay or additional cost and realise the benefits of collective bargaining.  

NB. An ACCC representative has advised Greenlife Industry Australia that the Class Exemption has been drafted and it is progressing through the parliamentary process for approval as a Regulation. This should be completed in the first half of the year. The ACCC will then engage directly with agricultural industry associations to explain how the class exemption for collective bargaining may be beneficial and how businesses can access the regime. 

Small business unfair contract terms (B2B UCT) framework 

In the PAG inquiry report, the ACCC stated its support for the Federal Government’s commitment to strengthening the small business unfair contract terms (B2B UCT) framework.  

The Minister for Consumer Affairs and agencies of the different Australian government jurisdictions have decided that they will seek to strengthen this framework by making unfair contract terms (UCTs) unlawful and giving courts the power to impose a civil penalty. Other proposed changes include improving clarity around the definition of a standard form contract, by providing further certainty on factors such as repeat usage of a contract template, and whether the small business had an effective opportunity to negotiate the contract.  

The eligibility threshold for the protections will be increased from less than 20 employees to less than 100 employees, and an annual turnover threshold of less than $10 million will be introduced as an alternative threshold for determining eligibility. 

PAG-wide industry code 

Submissions to the ACCC inquiry raised the idea of introducing a PAG-wide industry code to address harmful behaviours occurring across these industries. Currently, the Horticulture Code requires a horticulture produce agreement to specify certain terms, including requirements for the delivery of horticulture produce to the trader by the grower, quality and quantity specifications, circumstances under which produce can be rejected, and the pricing and fees1. However, this code does not extend the definition of horticulture produce to nursery products including: 

• Trees, shrubs, plants, seeds, bulbs, corms and tubers (other than edible tubers) 

• Propagating material and plant tissue cultures, grown for ornamental purposes or for producing fruits, vegetables, nuts or cut flowers or foliage; 

• Cut flowers or foliage2. 

The introduction of a PAG-wide industry code may not be flexible enough to meet the unique needs of greenlife industry members. However, a review of the industry codes may provide an opportunity to better protect suppliers of nursery products. 

The greenlife industry  

The greenlife industry has been experiencing increased demand for product since the COVID-19 pandemic broke out. However, what will happen when this demand levels out? The perishability of greenlife products puts producers at a significant disadvantage to sellers in the negotiation process. The introduction of these proposed regulations will potentially provide suppliers with better bargaining powers to assist them to work collectively to increase small business certainty and confidence. 

POSTSCRIPT 

In other news, the Federal Government’s Payment Times Reporting Scheme (PTRS) commenced on 1 January 2021. This scheme aims to improve payment times for small businesses. Businesses or corporations with a total annual income of over $100 million are now required to report the payment terms and practices for their small business suppliers twice a year. 

 

References

1. Australian Competition & Consumer Commission (ACCC) 2020, Perishable agricultural goods inquiry, November 2020, Canberra, Australia, page 111 

2. Australian Government 2017, Competition and Consumer (Industry Codes—Horticulture) Regulations 2017, 23 March 2017, page 7