The ACCC gives the green light to tenants to collectively bargain with landlords

Recently, Australia's key competition and consumer regulator, the Australian Competition and Consumer Commission (the ACCC), granted interim authorisation to tenant retailers to collectively bargain with landlords for rent relief amid COVID-19. The ACCC's decision comes after an application made by the Australian Retailers Association (ARA) on an urgent basis on 17 April 2020.  What is usually considered anti-competitive and unlawful, the ACCC has handed an exception to the ARA, its current and future members, due to the current crisis.

 

Collective bargaining

The chief legislation that governs competition and consumer affairs is the federal Competition and Consumer Act (Cth) (the Act). The object of the Act is "to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection".

In line with these objectives, the Act prohibits anti-competitive conduct such as "collective bargaining", which is an arrangement involving two or more competitors who 'band together' to negotiate prices, terms and conditions with a customer or supplier.

However, sometimes collective bargaining may be in the public interest to promote competition, particularly during times of financial crisis such as the current pandemic. In such cases, section 88(1) of the Act allows the ACCC to authorise the applicant to engage in the conduct specified by the ACCC's authorisation. For collective bargaining exemptions, the ACCC will need to satisfy itself that "the benefit to the public from the conduct outweighs any public detriment, including from a lessening of competition".

The ARA's application

The ARA is Australia's largest retail association, which represent the interests of the Australian retail sector and provide services such as advice, education and advocacy to its members who operate more than 60,000 retail shopfronts nationwide.

In its application, the ARA sought the ACCC's authorisation to allow the ARA, its current and future members to "discuss, exchange information and collectively negotiate with landlords regarding the support to be provided to retail tenants, including the appropriate information to be exchanged with landlords for that purpose".

In support of its application, the ARA submitted, amongst other things, that the:

  1. collective negotiations will account for the mandatory Code of Conduct that was announced by the Prime Minister on 7 April 2020 to regulate commercial and retail leases for the duration of COVID-19 (the Code). The Code prescribes, amongst other things, a set of "good faith leasing principles" to apply to commercial tenancies with eligible SMEs (which you can read more about in our article What does the new Commercial Tenancies Mandatory Code of Conduct mean to you);
  2. Code will enable retail tenants (who have regard to the Code) to create and give effect to contracts, arrangements or understandings in relation to the terms of the support given to retail tenants generally, or a class of tenants. The terms will likely concern, amongst other things, the information exchanged, non-disclosure agreements, terms of rent reductions and increases, the terms of reductions in statutory, insurance or other charges payable by the tenant, whether the landlords' conduct complies with the requirements and "spirit" of the Code, and a dispute resolution in the event landlords and tenants are unable to reach an agreement;
  3. the authorisation would result in broad public benefits including, preventing unemployment in the Australian retail industry, reducing transaction costs and efficiencies due to collaborative efforts by the tenants in developing consistent approaches with landlords, advancing the Code's objectives, and improve communication by providing tenants with a "collective voice".

The interim authorisation

The ACCC granted the ARA's current and future members to collectively bargain, albeit on an interim basis. The interim authorisation does not include sharing information on actual rental amounts for existing leases between the ARA and its members.

In reaching its decision, the ACCC considered that it is unlikely that the authorisation to collectively bargain and share information will significantly impact competition in the long term. The ACCC reasoned, amongst other things, that the:

  1. authorised conduct is a temporary measure and is for rental support;
  2. authorisation does not permit individual tenants to exchange information about actual rent amounts under existing or proposed leasing arrangements;
  3. authorisation does not override any pre-existing contractual obligations, including confidentiality clauses;
  4. authorisation does not obligate landlords to negotiate and can opt to do so on an individual basis. Also, participation for tenants is voluntary.
The ACCC decided that the net public interest benefit is in favour of granting the interim authorisation, echoing broadly the submissions made by the ARA.  Finally, the ACCC did not conduct a public consultation process for this matter. They will do so on the substantive application.

Expect more authorisations to follow

In short, any collective bargaining without the prior authorisation from the ACCC is unlawful. However, if the ACCC is satisfied that it would be in the public interest, it may grant an authorisation on terms specified by it. Accordingly, businesses that are subjected to an authorisation must understand the terms of the authorisation and ensure that it is compliant.

Businesses must also be cognisant of their obligations not to engage in anti-competitive conduct. The financial difficulties caused by COVID-19 is unprecedented and businesses must not 'shortcut' their legal obligations by engaging in anti-competitive conduct. The consequence of engaging in anti-competitive conduct can be very severe.

Contributors

Gidon Kangisser Lawyer