The Australian Competition and Consumer Commission issued a determination today which grants Victorian Farmers Federation member chicken growers authorisation to collectively bargain the terms and conditions of growing contracts with their processors, ACCC Chairman, Mr Graeme Samuel, said today.
"The ACCC has also authorised those VFF member growers to, under certain circumstances, agree to refuse to accept new batches of chicks where negotiations break down which is the first time the ACCC has authorised collective boycott arrangements of this type".
The ACCC believes that the possible anti-competitive effect of collective bargaining by chicken growers is very limited when having regard to the nature of the arrangements and the structure of the industry.
The ACCC accepted submissions that collective bargaining by growers will result in a number of public benefits. In particular, the ACCC has formed 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 can 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 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 new batches of chicks where negotiations broke down, the ACCC looked carefully at the potential for disruption to the supply of chicken meat to retailers and ultimately consumers. The VFF's proposal to reduce the likelihood of any industry-wide boycott by, separating bargaining groups according to their processor and requiring a six month bargaining period and a 28 day mediation period 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, to ensure that the industry will be better able to deal with any disruption, the ACCC also proposes to require that chicken growers provide their processors with 21 days notice prior to any collective boycott action. The ACCC considers this notice period would allow processors to take steps to lessen any impact to consumers of boycott action.
The ACCC has authorised the arrangements for a period of five years.
The processor applications
Separate to the VFF application, the ACCC has granted 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 has also granted authorisation to some contracts collectively negotiated under previously authorised arrangements.
Four related applications for collective bargaining from the other major chicken meat processors in Victoria have been denied because of a lack of support from their growers.