Collective Bargaining and Cartel-like Conduct- II

In the last post, I had discussed the possibility of pegging collective bargaining as a defense within the Proviso to Section 3(3) of the Competition Act. 

I had suggested that a collective stance taken by entities/persons which/who are placed similarly may be treated as a joint venture agreement which increases the efficiency in provision of services.

It is certainly possible to argue that an agreement entered into by parties with the ultimate object of preventing reduction in efficiency of services, too could be construed as a joint venture which increases the efficiency in provision of services.

After all, , if the intention of parties to a collective bargaining initiative/joint venture agreement is to ensure that the industry remains competitive, and that overall transactions costs do not increase, such an initiative/agreement must necessarily be seen as increasing the efficiency of the industry.

Simply put, in judging the object behind and effect of a collective act, and to decide if it can be legitimately treated as “collective bargaining” under the Proviso to Section 3(3), logic and law dictate that one must have regard to surrounding circumstances such as:

A. the nature of the business;

B. parity between parties;

C. the root cause/bone of contention;

D. alternatives to collective bargaining;

E. past negotiations/parleys between warring factions and like factors.

This is mandated by Section 19(3) which states that the Competition Commission of India “shall” have “due regard” to factors stipulated in Section 19 in determining whether an agreement has an “appreciable adverse effect” on competition.

In other words, if the CCI chooses to focus only on the effect with absolutely no regard to the cause, not only in the enquiry incomplete, the very legality of the enquiry can be challenged as unlawful under the Act.

Collective bargaining agreements among small business have been recognized as exceptions to cartel-like conduct in Australia. Following is the observation of the Committee of Inquiry for the Review of the Trade Practices Act of the Australian Parliament, also known as the "Dawson Committee”:

“In some industries a number of competing small businesses must bargain with big business. Individually, the small businesses may lack bargaining power and so may seek to join together and bargain collectively, thereby exercising a degree of countervailing power to that of big business. Collective bargaining at one level may lessen competition but, at another level, provided that the countervailing power is not excessive, it may be in the public interest to enable small business to negotiate more effectively with big business”

Even under the Taiwanese Competition Law, a collective effort by Small and Medium Enterprises (SMEs) for purposes of improving their efficiency or increasing competitiveness is permissible.

It also appeals to one’s sense of fairness that smaller entities who individually do not have a say at the negotiating table, must be in a position to come together to voice their grievances. This would probably go to the very root of competition jurisprudence, which is to provide a legal mechanism to redress market-place bullying.

Instead of relying on interpretation to legitimise collective bargaining, it would probably help to amend the law to expressly provide for collective bargaining by small business as a legitimate exception to cartel-like conduct.