Wakey, wakey ACCC: cartels are operating on your watch

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Judith Sloan

Rudely interrupted from a long period of peaceful sleep — pity about the damage to the economy in the meantime — the head of the regulator will rattle off all the normal excuses when criticised for failing to meet the aims of the under­pinning legislation.

We have limited resources; the law is not very helpful; we have conflicting legal advice; it is difficult to get witnesses to disclose important information. It’s a bit like asking a teenager to help around the house.

And so it has been with the Australian Competition & Consumer Commission in respect of any anti-competitive activity, no matter how egregious or economically destructive, if it involves trade unions or groups of workers. Nothing to see, just move along has been the consistent messaging of the ACCC for a very long time.

But what was seen as a breathtaking decision by the ACCC in June has roused a few of the organisation’s critics to challenge chairman Rod Sims to do better.

Were it not for the Royal Commission into Trade Union Governance and Corruption, it is highly unlikely the ACCC would have even considered the matter involving large transport company Toll Holdings and the Transport Workers Union.

The background to the case is that Toll and the TWU entered into an agreement in which the company handed over $150,000 a year to the union to establish the Transport Education Audit Compliance Health Organisation Limited. As part of the deal, the TWU was required to spy on Toll’s competitors, requesting sensitive information from those companies, then to report back to Toll.

But as far as the ACCC was concerned, this arrangement was just hunky-dory because the market for road freight business was fragmented and, by the way, TWU spied only on small companies. The ACCC decided the relevant market — always the key in these cases — was the entire road freight market rather than the much more concentrated large user market: think supermarket and hardware chains.

For this reason, the ACCC concluded there was no substantial lessening of competition and no reason TEACHO couldn’t continue, along with the required spying ­activity by the TWU. Needless to say, the TWU publicly celebrated the decision.

I’m sorry, Rod, this just doesn’t pass the pub test.

Perhaps sensing that the TEACHO decision might cause a few raised eyebrows, the ACCC’s press release on the decision hastened to add that “the ACCC has previously taken action with respect to alleged anti-competitive conduct involving unions’’.

Most recently, the ACCC instituted proceedings in the Federal Court against the Construction Forestry Mining and Energy Union, alleging it engaged, or attempted to engage, in secondary boycott conduct directed at Boral Resources. That would be after the ACCC sat on its hands and delayed its decision to institute proceedings against the CFMEU as Boral Resources bled money in Victoria as a consequence of the secondary boycott — or should I say alleged secondary boycott.

There is no doubt that some further revelations from the royal commission have caused further embarrassment for the ACCC. It is pretty clear there are cartels operating in the ACT in respect of all large-scale construction and civil engineering work.

The CFMEU enforces all sorts of price fixing; for scaffolding and formwork, for instance. And firms get work only with the CFMEU blessing (and a CFMEU-approved enterprise agreement), sometimes in exchange for monetary kickbacks and always with the compliance of the head contractors.

We now are told the “ACCC is investigating potential cartel behaviour in the ACT construction sector”. And wait for this admission: “It is possible that in the past the ACCC has not looked sufficiently into restrictive behaviour that could amount to a contract, agreement or understanding that has the purpose or effect of substantially lessening competition, thinking such matters were covered by the carve-outs and exemptions (in the legislation).” No kidding.

It is important to understand the importance of the competition regulator doing its job in relation to clearly anti-competitive behaviour on the part of trade unions and employers.

Trade unions can flourish only when there are economic rents to be divvied between workers and businesses, with side payments to trade unions also welcome. In competitive markets, business can earn only normal profits and workers are paid competitive wages; any deviation from this position will cause businesses to contract or fail.

This is why deals between businesses and trade unions to man­ipulate markets in anti-com­petitive ways can lead to a narrow win-win outcome for the parties to the cartel, including the relevant trade union, even if there is considerable loss to economic efficiency and greater costs imposed on customers and taxpayers.

It is hardly surprising that the ACT should be the locus of corrupt practices on the part of building companies and the unions because so much of the building work is funded by the taxpayer. The taxpayer has deep pockets and the incentives of those in charge of awarding and overseeing these projects mainly revolve around a quiet life and no fuss.

But these cartel arrangements do not apply only in instances where the taxpayer is picking up the tab.

Large-scale CBD developments, with few exceptions, are characterised by the head contractors doing the bidding of the CFMEU which, in turn, dictates who can work on the sites and the terms on which they do so.

And we should not kid ourselves that the problems relate only to construction.

There is a variety of industries — transport, stevedoring, coastal shipping are further examples — in which market manipulation occurs, and the ACCC should not need the prodding of a once-off royal commission to do its job.

Let’s hope the ACCC’s long ­hibernation is at an end and that it now explores every option under the legislation — and, yes, there are carve-outs and exemptions — to root out detrimental anti-competitive behaviour by trade unions and employers.

Extracted in full from:  theaustralian.com.au