Tapping into collaborative procurement during and after COVID-19
The COVID-19 pandemic, and public measures taken in response to the health crisis, have cast a spotlight on business practices which might typically attract the operation of competition laws in more normal times. The Australian Competition and Consumer Commission (ACCC) has been very active in responding to, and in most cases facilitating, coordination between companies as they respond to pressing community needs in these particular times. A summary of some recent Authorisations by the Commission was outlined in our previous article here. These preliminary approvals of business conduct have been granted in extremely short periods, particularly where the usual timeline proposed by the ACCC for a full approval is in the order of six months.
As extreme as the recent cases have been, the Commission’s Authorisation team has been busy in recent times with a wide range of applications for authorisation. These applications are made in respect of conduct which may otherwise be regarded as anti-competitive under the Competition and Consumer Act. An authorisation tends to be granted where the applicants are able to demonstrate a public benefit from the conduct which outweighs the anti-competitive effect of the conduct. (For certain types of otherwise anti-competitive conduct there may also be the option of lodging a notification with the Commission, which doesn’t entail the process of the Commission assessing the conduct at the time, but does leave the conduct open to a subsequent determination by the Commission that the conduct not be permitted.)
One area where a number of authorisations have been granted in recent times involves the process of collaborative procurements. These usually involve a number of purchasing entities working together to seek a supply of a service which requires some substantive financial investment in order to be delivered, and delivery over a significant period of time. A topical example is councils in a particular region seeking waste processing services, where the delivery of improved services requires the building of technologically advanced infrastructure. One council alone will not have sufficient quantities of waste to justify building a new plant that will reduce the amount of waste going to landfill, but a group of councils may have volumes of waste from kerbside collection that make the investment in a new facility and its operation over a number of years economically feasible. In such circumstances, the public benefits such as less waste going to landfill can be enough to overcome the possible anti-competitive impact of councils, who would otherwise compete with each other to engage waste service providers, working together.
The example of councils is a clear instance of the principles in action, but the availability of authorisations is not restricted to the local government sector, and the recent conditions associated with the current coronavirus pandemic show that there will be many situations where there may be compelling public benefits that may well outweigh possibly decreased competition in the relevant market. Much will depend on the characterisation of the relevant market, and the dynamics of the participants in that market, both on the supplier side and the customer side. Even in the municipal waste sector, a recent application in South Australia shows that where the proposed procurement relates to a great number of streams of waste (which may include recyclable materials, organic materials, the residual waste that remains from kerbside collection, and building and construction waste), the impact on that broader market may be such that environmental benefits are not sufficient to result in a net public benefit.
The forecasts for the period after COVID-19 restrictions are lifted indicate that the economy may well be significantly changed. It may be that certain markets are wholly transformed. Accordingly, there may be opportunities for collaboration in all sorts of procurement which may have been difficult to proceed with in the past, but which now could be feasible.