Lane Neave’s Competition and Consumer Protection team recently achieved a resounding success for New Zealand Tegel Growers’ Association Incorporated (TGA) and its members in securing an authorisation from the Commerce Commission to legally engage in collective bargaining for the next 10 years.
TGA is an industry association which represents most of the independent contractors who supply chicken growing services to Tegel Foods Limited (Tegel), one of the largest chicken processors in New Zealand.
The Commerce Act 1986 prohibits businesses from engaging in anticompetitive conduct. Collectively negotiating the terms on which businesses supply services to customers is generally prohibited. However, section 58 of the Commerce Act allows the Commission to grant authorisation for restrictive trade practices, with such anti-competitive agreements being allowed where the public benefits outweigh the competitive harms.
Having applied successfully in 2017 for an authorisation to allow members of the Waikato – Bay of Plenty Chicken Growers Association Incorporated to collectively bargain with Inghams Enterprises (NZ) Pty Limited, Lane Neave was well placed to lodge a similar application to the Commission on behalf of TGA.
In 2021, Lane Neave obtained provisional authorisation for TGA and its members to commence collective bargaining with Tegel while the Commission considered the TGA’s main application for the same conduct. It was the first time in New Zealand that the Commission had considered an application for provisional authorisation, with the Commission approving the application on the basis that the anticipated potential benefits of collective negotiation were likely to outweigh the potential detriments.
Commissioner Sue Begg later observed that “under the Commission’s provisional authorisations, Tegel and TGA have been able to engage in collective negotiations while the Commission assessed the application for authorisation. These negotiations have resulted in savings for the parties by lowering the cost of negotiating”.
In August 2022, the Commission went on to grant TGA a full authorisation after reaching the view that while it is likely that the proposed collective bargaining arrangements would lessen competition, any reduction in competition is likely to be outweighed by the public benefits.
Anna Ryan, who heads Lane Neave’s Competition and Consumer Protection team, described the Commission’s decision to allow the TGA and its members to engage in collective bargaining with Tegel as “further confirmation that in certain circumstances, it is appropriate to allow independent businesses to negotiate collectively with large purchasers. Collective negotiation can deliver many benefits, including reduced transaction costs and the ability to negotiate more sophisticated agreements due to the smaller suppliers being able to pool their knowledge and resources”. Anna went on to extend her thanks to all those who assisted with the applications, particularly competition barrister John Land for his valuable contribution.
