Collective Bargaining in the Retail Sector

Jul 30, 2020

By Business Law Team

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The impact of the COVID-19 pandemic on the retail market has been indisputable. Large downturns in trade and foot traffic have put pressure on regulators to facilitate industry action to assist the continued survival of retail businesses.

One proposed method for assisting retail tenants has been the use of “Collective Bargaining”. This is when multiple competitors work together to negotiate better terms, conditions, or prices with a common customer or supplier.

What is it?

On 2 July 2020, the ACCC made an interim authorisation allowing retail tenants to engage in collective bargaining. This was in response to two applications made by:

  1. The Australian Retailers Association (ARA); and
  2. The National Retail Association (NRA) on behalf of:
  • the Pharmacy Guild of Australia;
  • the Australian Hotels Association;
  • the Franchise Council of Australia Limited;
  • the Australian Newsagents’ Federation Limited; and
  • the Australian Federation of Travel Agents Limited.

(“the Applicants“)

This interim authorisation will permit members of the Applicants to engage in collective bargaining until a final determination is made by the ACCC, or until the ACCC chooses to revoke the authorisation. The ACCC’s website states that it intends to publish its final determination in September 2020.

There are a number of rules that govern exactly what behaviour is permitted under the interim authorisation, they are as follows:

What is allowed

Discuss and share information

Members of the Applicants (“Members“) will be permitted to discuss the following matters with each other:

  1. Nature and extent of the impact of the COVID-19 pandemic and the measures being implemented or considered to mitigate this impact;
  2. Information about the retail precincts in which members operate (e.g. declining customer counts);
  3. What information is being requested by landlords in the context of COVID-19 related negotiations;
  4. What actions are being requested by landlords in the context of COVID-19 related negotiations; and
  5. What positions are being adopted by landlords in respect of COVID-19 related negotiations.

Collective Negotiation

Members will be permitted to engage with landlords collectively in regards to:

  1. The support being provided to tenants; and
  2. The appropriate information to be exchanged with landlords.

Make Contracts

Members will be permitted to make and enter into contracts and agreements as to the terms of support that will be provided by landlords. Such agreements would likely address matters such as:

  1. What information should be shared between parties;
  2. The appropriate actions to be taken by the parties involved;
  3. Size and form of rent reductions;
  4. The passing through to tenants of any savings or concessions obtained by the landlord; and
  5. The ability of the landlord to increase rent.

What is not allowed

While the interim authorisation does permit members to share a wide range of information, this does not mean that all information can be shared. Members will still be prohibited from sharing  the actual dollar amounts of:

  1. Rent payable;
  2. Rent incentives previously granted by landlords;
  3. Outgoings payable;
  4. Any other monies payable to the landlord.

Instead these amounts must be expressed as percentages.

Further authorisations granted to the NRA

The NRA application also provides for additional authorisations with respect to landlords. As a result, landlords that are members of the NRA (or the groups they represented in their application) will be permitted to:

  • Discuss the issues faced by their SME Tenants and the most beneficial means of relief; and
  • Negotiate and give effect to agreements which support tenants (e.g. deferring or cancelling rent payments)

Similarly, landlords must keep information pertaining to individual tenants private (e.g. trading data, financial information, or any other confidential information).

Reporting Conditions

It should be noted that the ACCC has granted this authorisation on the condition that the Applicants must collect records of all meetings and communications engaged in by its members in relation to the permitted behaviours and submit these to the ACCC.

In relation to the NRA’s application, there are also similar reporting obligations on landlords.

Wrap up

In permitting this style of collective bargaining, the ACCC has handed a powerful tool to retail tenants during the COVID-19 pandemic. The ability to gain a greater understanding of market conditions, and to work together with other tenants, has the potential to place many tenants in a much stronger negotiating position when dealing with their landlords. We suggest that all such tenants consider the benefits it may present.

If you have any questions, please contact the Commercial Team at Clinch Long Woodbridge Lawyers.

Important Disclaimer: The content of this publication is general in nature and for reference purposes only. It is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

 

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