New competition law exemption for supply chain shocks

It's now simpler for the ACCC to grant an exemption for an industry to collectively act together to address supply chain shocks if there are "exceptional circumstances" that pose a risk to the Australian economy, businesses and consumers.

A precondition for the ACCC to grant an exemption to industry is that the Australian Treasurer has first declared that  "exceptional circumstances" exist, which would warrant businesses needing to collaborate. An example may be supply chain issues, such as those caused by the conflict in the Middle East.

Such circumstances may call for coordinated responses by businesses to complement the work of the Government in protecting the Australian public and economy from the impact of the crisis. This might involve engaging in collaborative conduct which may otherwise risk breaching provisions of the Competition and Consumer Act 2010 (Cth) (CCA).

An "exceptional circumstance declaration", therefore, enables the ACCC to fast-track class exemptions and authorise industry to act in ways that may ordinarily be unlawful, provided it is in the public interest. This may include, for example, coordinating to ensure continued supply of a critical product or service during a national crisis. The new powers include safeguards to protect consumers from harm, and declarations are subject to disallowance and sunset provisions.

Why the "exceptional circumstance declaration" was introduced

The costs and time involved in the existing administrative processes for applying to the ACCC for an exemption are slow and can delay efforts by businesses to respond rapidly.

Accordingly, the Bill allows the ACCC to have additional flexibility in national emergencies or exceptional circumstances falling short of a national emergency. According to the Bill, the ability to respond quickly and early may prevent, or substantially mitigate, the extent of significant harm to the economy.

This is particularly relevant where coordination between competitors is necessary to maintain supply chains or essential services. The Bill may enable competitors to collaborate (for example, on supply, logistics or distribution) within days rather than months.

According to the ACCC Chair, Ms Cass-Gottlieb,

“The new streamlined exemption processes will help businesses to move quickly to coordinate practical responses during emergencies. The ACCC will apply clear safeguards, so coordination goes no further than necessary and impacts on competition are minimised.”

How the exemption will work

For an exemption to be granted, the ACCC must be satisfied that the proposed coordination is likely to assist in the response to, or recovery from, the exceptional circumstances which are declared, having regard to the public benefit and any detriment to the public. The ACCC has advised that it will develop practical guidance in close consultation with businesses and other stakeholders.

Applications are free of charge, reflecting the economic challenges faced by businesses during exceptional circumstances. The exemption has a maximum duration of six months.

If granted, an authorisation provides protection only for the conduct specified in that authorisation. The ACCC may grant an authorisation subject to time limits or conditions specified in the authorisation, and the protection of an authorisation does not apply if any of the conditions are not complied with. The ACCC can revoke authorisations if a business’s collaborative conduct exceeds what is strictly necessary to mitigate the crisis.

Importantly, the ACCC decisions under the new streamlined process are not subject to merits review by the Australian Competition Tribunal. This means third parties cannot challenge a decision to grant an authorisation on its merits, providing greater certainty for businesses that obtain one. Equally, however, applicant businesses could not challenge a refusal on the merits if an application were declined.

What does this mean for businesses?

If the Treasurer makes an exceptional circumstances declaration, the Bill creates a practical opportunity for businesses to apply quickly to the ACCC for an exemption to engage in structured industry coordination that would otherwise risk breaching the CCA.