Collective bargaining in the dairy industry

Collective bargaining describes the process whereby small businesses form groups with similar business interests in order to negotiate advantageous conditions of supply with larger businesses. Ordinarily, this practice is in breach of s45 of the Trade Practices Act 1974 because it is likely to significantly lessen competition. However, s88 of the Act allows the Australian Competition and Consumer Commission (ACCC) to authorise actions that lessen competition, provided the net public benefit outweighs any lessening of competition.

Collective Bargaining in the Dairy Industry

In March 2002, in response to an application by the Australian Dairy Farmers Federation (now Australian Dairy Farmers – ADF), the ACCC issued a final determination to authorise collective negotiations by dairy farmers across Australia of contractual terms and conditions of raw milk supply to processors. Specifically, the ACCC authorisation allows groups of dairy farmers to form collective bargaining groups through which they may collectively negotiate terms of supply, including pricing, with a dairy processing company that each member of the group wishes to supply.

As part of the application, ADF requested an umbrella authorisation to minimise the costs associated with small groups of dairy farmers applying separately to the ACCC for collective bargaining authorisations.

The ACCC decision was welcomed by the Australian Government and the dairy industry on the basis that they helped to re-dress the imbalance in market power between individual farmers and the processors they supply, particularly during the transition to a deregulated milk market. The umbrella decision in relation to the ADF application also reduces transaction costs for individual dairy farmer groups that no longer need to apply for separate authorisation.

In 2006 the authorisation was extended to allow Australian dairy farmers to participate in collective bargaining until 2011. ADF have indicated they intend to reapply to have the 2011 deadline extended for a further 5 year period.

Collective Bargaining Workshops

In April 2003, the Australian Government funded a series of workshops to help dairy farmers understand and apply the 2002 decision by the Australian Competition and Consumer Commission (ACCC) to allow collective bargaining by dairy farmers. The workshops focused on the rules and the processes applying to the formation of groups and the potential benefits of collective bargaining as a farm risk management tool.

A team of state and national dairy industry representatives, an ACCC representative and a consultant specialising in dairy pricing and marketing ran the workshops using specific local and regional knowledge. The workshops, each of about 2 hours duration, were held in regional locations in Queensland, NSW, Victoria, South Australia and Tasmania from 22 April to 7 May 2003.