chapter6.5

Anti-Competitive Conduct

Subject / Paragraph
A –INTRODUCTION / 1
B –TYPES OF ANTI-COMPETITIVE CONDUCT / 5
Cartel conduct / 6
‘Services’ / 15
Accessorial liability: section 79 of the Competition and Consumer Act 2010 (Cth) / 16
CFMEU’s approach / 18
C –SCAFFOLDERS / 25
Further meetings in 2015 / 48
D –CONCRETERS / 60
E –OTHER TRADES / 70
Bricklayers / 71
Crane operators / 86
General evidence / 92
F – A WARNING / 97

A –INTRODUCTION

1.At the conclusion of the hearings in Canberra, the Australian Competition and Consumer Commission (ACCC) announced that it had commenced making inquiries into cartel conduct in the building industry in the ACT. A joint agency agreement has been entered into between the ACCC and the Trade Union Royal Commission Taskforce.

2.Counsel assisting submitted that the evidence before the Commission reveals an industry with a number of features that operate to reduce competition substantially. Those features included: CFMEU pattern EBAs, an expectation on the part of CFMEU EBA contractors that the CFMEU will stop contractors without a CFMEU EBA from working in the commercial construction industry and a willingness on the part of CFMEU officials to satisfy that expectation.

3.There was evidence, also, of cartel conduct and of attempts by CFMEU officials to induce it. It is with that conduct that this Chapter is principally concerned. One simple example in the evidence concerned a bricklayer, referred to in the evidence as Charlie. Charlie was charging a builder $4 per block. This was less than bricklayers with CFMEU EBAs, who were charging at least $6 per block. A ‘compliant’ EBA bricklayer found out that Charlie was working on a particular site and told Johnny Lomax. He asked Johnny Lomax, in effect, to stop Charlie from working. Johnny Lomax promptly located Charlie and went to see him. In substance, he told Charlie that he could not charge $4 per block and that he needed to get an EBA and price properly if he wanted to do any work in Canberra. Johnny Lomax enlisted the help of another EBA bricklayer to help Charlie price for the next job. Johnny Lomax reported back to the original complainant bricklayer who indicated that he would be content if Charlie complied with Johnny Lomax’s requests.

4.Counsel assisting submitted that, in light of the ongoing ACCC investigation, and the possibility that further or other factual material might emerge, no findings should be made about whether there may have been contraventions of provisions of the Competition and Consumer Act 2010 (Cth). The CFMEU’s submission is that there should be a finding acknowledging that there is no evidence to suggest any involvement by CFMEU officials in cartel conduct. For reasons explained further below, counsel assisting’s submission is accepted and the CFMEU’s submission is rejected.

B –TYPES OF ANTI-COMPETITIVE CONDUCT

5.It is appropriate to begin by identifying the centrally relevant legislative provisions. That identification is drawn largely from counsel assisting’s submissions.

Cartel conduct

6.By s 44ZZRF of the Competition and Consumer Act 2010 (Cth) a corporation commits an offence if it makes a contract or arrangement or arrives at an understanding and the contract, arrangement or understanding contains a ‘cartel provision’. Section 44ZZRJ of that Act imposes civil liability under the same circumstances.[1] A contravention of s 44ZZRF requires proof of intent and must be established beyond reasonable doubt. A contravention of s 44ZZRJ does not require proof of intent and must be established on the balance of probabilities.

7.The effect of section 44ZZRD of the Act, relevantly for present purposes, is that the following conditions must be satisfied for a provision of a contract, arrangement or understanding to be a ‘cartel provision’:

(a)the provision must have the purpose, or have or be likely to have the effect, of fixing, controlling or maintaining the price for goods or services supplied, or likely to be supplied, by any or all of the parties to the contract, arrangement or understanding (s 44ZZRD(1)(a)(i) and s 44ZZRD(2)(a) and 2(c) of the Act);[2] and

(b)at least two parties to the contract, arrangement or understanding are or are likely to be in competition with each other in relation to the supply of those goods and services (s44ZZRD(4)(a) and 4(c)of the Act).

8.So far as ‘purpose’ is concerned, the question is whether the proscribed purpose was a substantial one, not the sole one.[3] The question is whether the provision has that purpose. Ultimately, that refers to the subjective purpose of the parties.[4]

9.As to ‘fixing, controlling or maintaining’, ‘controlling’ is most relevant in the present context. Generally, ‘maintaining’ assumes there has been a ‘fixing’ beforehand;[5] ‘controlling’ means ‘to exercise restraint or direction over’. An arrangement has the effect of ‘controlling price’ if it restrains a freedom that would otherwise exist as to a price to be charged.[6] Specificity as to price is not a necessary element of the notion of ‘controlling’ price.[7]The imposition of a ceiling and a floor on tender prices was sufficient to amount to controlling in ACCC v TF Woollam & Son Pty Ltd.[8]

10.For there to be a contravention of s 44ZZRF, it is necessary to show that there is a ‘contract, arrangement or understanding’. An ‘arrangement’ or ‘understanding’ requires something more than a mere expectation. The following observations of LindgrenJ in Australian Competition and Consumer Commission v CC (NSW) Pty Ltd[9] (emphasis in original) were endorsed by the Full Court in Rural Press Ltd v Australian Competition and Consumer Commission:[10]

The cases require that at least one party “assume an obligation” or give an “assurance” or “undertaking” that it will act in a certain way. A mere expectation that as a matter of fact a party will act in a certain way is not enough, even if it has been engendered by that party. In the present case, for example, each individual who attended the Meeting may have expected that as a matter of fact the others would return to their respective offices by car, or, to express the matter differently, each may have been expected by the others to act in that way. Each may even have “aroused” that expectation by things he said at the meeting. But these factual expectations do not found an “understanding: in the sense in which the word is used in ss45 and 45A. The conjunction of the word “understanding” with the words “agreement” and “arrangement” and the nature of the provisions show that something more is required.

11.The Full Court of the Federal Court in Australian Industry Group v Fair Work Australia[11]held that an EBA was not a ‘contract, arrangement or understanding’. More is said about that decision below.

12.The terms of an enterprise agreement might be thought to be excluded from consideration in assessing cartel conduct by operation of s51(2)(a) of the Competition and Consumer Act 2010 (Cth). That provides that in determining whether a contravention of a provision of Part IV of the Act has been committed (other than, relevantly, a contravention of s 45E of the Act), regard shall not be had to:

any act done in relation to, or to the making of a contract or arrangement or the entering into of an understanding, or to any provision of a contract, arrangement or understanding, to the extent that the contract, arrangement or understanding, or the provision, relates to, the remuneration, conditions of employment, hours of work or working conditions of employees.

13.However, following the decision of the Full Court of the Federal Court in Australian Industry Group v Fair Work Australia,[12] there is a difficulty in applying this exclusion to EBAs. If they are not contracts or arrangements or understandings, then neither they, nor any of their terms, nor acts done in relation to them are excluded by s 51(2)(a) from consideration in assessing Part IV conduct.

14.The submissions of counsel assisting proceeded on the basis that the mere agreement by contractors in a particular section of the construction industry to enter into EBAs on the same terms would not contravene the cartel provisions of Part IV of the Competition and Consumer Act 2010 (Cth). That basis is a highly dangerous one. Analysis proceeding on that basis has to be undertaken with care. However, it is appropriate to take the same course in this Report.

‘Services’

15.The definition of ‘services’ in s 4 of the Competition and Consumer Act 2010 (Cth) imposes another limitation that is important for present purposes. That definition excludes, relevantly, ‘rights or benefits being … the performance of work under a contract of service’. Thus, an understanding or arrangement that fixes, controls or maintains the price that a company pays its employees is not an understanding or arrangement with respect to ‘services’ for the purposes of the above provisions.

Accessorial liability: section 79 of the Competition and Consumer Act 2010 (Cth)

16.Section 79(1) of the Competition and Consumer Act 2010 (Cth) makes provision for the imposition of accessorial liability in relation to cartel provisions (ss 4ZZRF and 44ZZRG of the Act). Most relevantly for present purposes, s 79(1)(b) has the effect that a person who attempts to induce another to contravene a cartel provision is taken to have contravened that provision.

17.It is apparent from the terms of s 79(1)(b) itself that a person may attempt to ‘induce’ such a contravention by promises, threats, or otherwise. As the Full Court of the Federal Court stated in Trade Practices Commission vParkfield Operations Pty Ltd,[13] an attempt to persuade someone to contravene a provision of Part IV can amount to attempt to induce within the meaning of section 76(1)(d) of the Competition and Consumer Act 2010 (Cth). Further, ‘mere persuasion, with no promise or threat, may well be an attempt to induce’.[14]

CFMEU’s approach

18.At this point it is convenient to refer to some of the submissions made by the CFMEU regarding the above provisions.[15]

19.First, the CFMEU submitted that the effect of Australian Industry Group v Fair Work Australia[16]was that neither an enterprise agreement nor the process of negotiation leading up to it could amount to a contract, arrangement or understanding within the meaning of the Competition and Consumer Act 2010 (Cth). But that case is not authority for the proposition that cartel conduct is excluded from the operation of the Act merely because it occurs during the negotiation of an EBA. To the extent the CFMEU’s submissionexpresses a contrary view, it takes too broad a view of that decision and seeks to apply it well beyond its facts. However, as the above analysis has indicated, the effect of s 51(2)(a) is that conduct connected with the negotiation of an EBA might not be cartel conduct.

20.Secondly, the CFMEU submitted that it was ‘trite’ to observe that accessorial liability presupposes principal liability. That observation is true of some types of accessorial liability but untrue of others. It is untrue of the type of accessorial liability created by s 79(1)(b) of the Competition and Consumer Act 2010 (Cth): the offence of attempting to induce cartel conduct does not require proof that cartel conduct has in fact occurred.

21.Thirdly, the CFMEU pointed out that s 44ZZRD(6) had the effect that a provision of a contract, arrangement or understanding is not taken to have the purpose of fixing, controlling or maintaining a price merely because it recommends or provides for the recommending of, a price. That is so. But, it does not follow, as the CFMEU appeared to submit, that a union official who recommends that others agree to charge a price or a minimum price is not attempting to induce cartel conduct. That union official is not recommending that others come to an arrangement that recommends, or provides for the recommending of, a price.

22.Apart from these legal submissions, the substance of the CFMEU’s submissions was that there was no evidence of cartel conduct and no evidence of actual prices charged.[17] This submission was premised on the view that, if correct, it followed that CFMEU officials did not attempt to induce cartel conduct. As stated above, that premise is wrong. Further, the submission itself is wrong. The telephone intercepts dealing with Charlie the bricklayer, referred to at the commencement of this Chapter and discussed in more detail below,were evidence of both matters. There was much other evidence of cartel conduct, referred to below. But so alsowas there evidence that pointed against the existence of cartel conduct. And, as counsel assisting’s submissions pointed out, there was potentially relevant evidence that was not before the Commission.

23.Although the CFMEU agreed with counsel assisting’s submissions that no findings should be made, it said the Commission should go further. It submitted thatthere should be an acknowledgement that there was no credible evidence of any attempt by CFMEU offices to engage in cartel conduct.[18]As indicated above, that submission proceeds on an incorrect view both of the law and of the evidence. The appropriate approach, having regard to the matters identified by counsel assisting, is to make no findings.

24.The remainder of this Chapter sets out, drawing largely on counsel assisting’s submissions, the relevant evidence on this topic. Most attention was given to the scaffolding industry. It is convenient to consider that first and then deal with the other industries, about which there was less evidence.

C –SCAFFOLDERS

25.The CFMEU engages in pattern bargaining in each of the major trades in the construction industry. One such trade is scaffolding. Negotiations for a new EBA for scaffolders commenced in late 2012. There were five or six such meetings, the last of which appears to have taken place in the first half of 2013. It would seem that all of the scaffolders in the commercial sector were invited to these meetings and that all, or most, attended at least some of the meetings.[19]

26.The evidence of PetarJosifoski (MPR) in his statement was that at one of these meetings Anthony Vitler and/or Jason O’Mara said words to the following effect:[20]

We are trying to get you more money on the jobs by getting all the companies to agree on a minimum price for jobs.

27.PetarJosifoskisaid that in response to this he stood up and said words to the effect of ‘this is price fixing. I can’t be listening to this. I could go to jail just for talking about it’.[21] According to PetarJosifoskieither Anthony Vitler or Jason O’Mararesponded with words to the effect of ‘well we’ve done it to the formwork sector in Canberra and it’s working there’.[22] In oral evidence PetarJosifoskisaid that the meeting at which these things were said was a meeting in February.[23] PetarJosifoskirejected the proposition that the only conversation at the meeting about minimum price was about the minimum amount of money that people would need to charge in order to cover their obligations under the EBA.[24]

28.Other scaffolders who attended these meetings also gave evidence. Scott Jefferywas the sole director of Straight Up Scaffolding (ACT) Pty Ltd. He attended three or four EBA meetings.[25] In his witness statement, Scott Jefferysaid that he could recall either Anthony Vitler or Jason O’Mara asking everyone what the contractors thought would be the minimum they would need to charge for their labour per square metre in order to cover the cost of the EBA. Scott Jefferysaid that he believed that some people at the meeting, he could not remember who, suggested $15-$16 per square metre as the minimum price they would have to charge per square metre.[26]

29.In oral evidence, Scott Jefferysaid that the $15 or $16 figure was a ‘ballpark’ figure. He said ‘I mean, prices vary on different jobs and it depends on if you’ve got good blokes, bad blokes, or whatever but, yes, there was some sort of discussion on 15 or 16 bucks, but that was just more like ballpark figures on roughly what everyone was thinking about.’[27]

30.Adam McEvilly, one of the directors of Higher Up Pty Ltd, an ACT scaffolding company, also gave evidence. Adam McEvilly in his witness statement said that he attended a meeting regarding the EBA in early 2013. He said that at this meeting there were some general complaints regarding the wage rates and other costs in the proposed EBA. Adam McEvilly said that in response to such complaints either Jason O’Mara or Anthony Vitler said words to the effect of ‘if everyone puts their prices up, you will be able to service the EBA’.[28] Adam McEvilly said that the response to the group to this suggestion was not positive. He said that Jason O’Mara and Anthony Vitler also spoke generally about the scaffolders charging a minimum price for jobs, and that Jason O’Mara suggested that all scaffolding companies could put forward money into a kitty and if a company started undercutting, that company would not get their money back.[29] Adam McEvilly in both his witness statement and in oral evidence said that nothing came of Jason O’Mara’s suggestion to pay money into a kitty.[30]

31.In oral evidence, Adam McEvilly agreed that either Jason O’Mara or Anthony Vitler said words to the effect of ‘we are trying to get you more money on the jobs by getting all the companies to agree on a minimum price for jobs’.[31] Adam McEvilly also agreed that Jason O’Mara asked, ‘what price per metre do you need to comply with the EBA?’ and that in answer one of the scaffolders responded $15 or $16.[32] Adam McEvilly adhered to this evidence in questioning by counsel for the CFMEU.[33]

32.John Ryan, the managing director of To The Top Scaffolding Pty Ltd, also gave evidence. He attended two of the EBA meetings for scaffolders. In his witness statement, John Ryan said that he complained at one of these meetings that the companies without a CFMEU EBA could quote on jobs for significantly lower rates and were winning work and he said other people had made similar complaints.[34] John Ryan said that in response either Jason O’Mara or Anthony Vitler said that the way to get around that problem was that all of the scaffolding companies should give their tender information to the CFMEU and that a minimum per square metre rate would be decided on and that if the CFMEU found out that a scaffolding company was quoting for jobs under that rate they would be ‘hammered and run out of town’.[35]