The Australian Competition and Consumer Commission in a draft determination proposes to authorise* Victorian Farmers Federation member chicken growers to collectively bargain the terms and conditions of growing contracts with their processors, ACCC Chairman, Mr Graeme Samuel, said today.
"The ACCC also proposes to allow those VFF member growers, under certain circumstances, to engage in collective boycott activity where negotiations break down".
The ACCC believes that the possible anti-competitive effect of collective bargaining arrangements is very limited when having regard to the nature of the proposed arrangements and the structure of this industry.
The ACCC accepted submissions that collective bargaining by growers will result in a number of public benefits. In particular, the ACCC is of the view that collective bargaining arrangements are likely to provide growers with greater input into their contracts with processors leading to more efficient outcomes. The ACCC also considers that transaction cost savings may be achieved.
"On balance, therefore, the ACCC considers that allowing chicken growers to collectively bargain is in the public interest".
In the specific circumstances of the industry, the ACCC has also accepted the VFF's claim that the benefits of collective bargaining are far more likely to arise if their member growers have the ability to collectively boycott processors where negotiations break down.
Generally speaking, the ACCC considers collective boycott activity can substantially increase the anti-competitive effects of collective bargaining and for this reason the ACCC has been reluctant to authorise collective boycott arrangements in the past.
In considering the VFF's proposal to allow growers to refuse to accept day-old chickens where negotiations broke down, the ACCC looked carefully at the potential for disruption to the supply of chicken meat to retailers and ultimately consumers. However, the VFF's proposals to reduce the likelihood of any industry-wide boycott by separating bargaining groups according to their processor and to require six months bargaining and 28 days mediation prior to any boycott action lessened the ACCC's concerns.
The ACCC was also satisfied that growers – who rely almost entirely on processors for their income – would only consider boycott action as a last resort and that any boycott would be extremely damaging to their business.
In this case, the ACCC also proposes to require that growers provide processors with 21 days notice prior to any collective boycott action. The ACCC considers this notice period would allow processors to take steps to significantly lessen any impact to consumers of boycott action.
The ACCC proposes to authorise the arrangements for a period of five years.
The processor applications
Separate to the VFF application, the ACCC proposes to grant authorisation to a similar application lodged by a Victorian chicken meat processor, Bartter Enterprises, to collectively negotiate contracts with some of its growers. The ACCC also proposes to grant authorisation to some contracts collectively negotiated under previously authorised arrangements. Four related applications for future collective bargaining from the other major chicken meat processors in Victoria are proposed to be denied because of a lack of support from their growers.
Before the ACCC's final decisions, interested parties who are dissatisfied with the ACCC's draft decision can request a public conference to discuss the operation and effect of the draft determination or make an additional submission. Interested parties wishing to make a submission in relation to the draft determination should address their submission to: The General Manager, Adjudication Branch, ACCC, PO Box 1199, Dickson ACT 2601 or adjudication@accc.gov.au.
*The Trade Practices Act 1974 prohibits certain forms of anti-competitive agreements, including agreements between competitors that limit their ability to deal with whom they choose or on the terms they choose (including price). Authorisation provides immunity from court action under the Act arising from such agreements but can only be granted where the ACCC is satisfied that the public benefit flowing from the conduct outweighs any public detriment.