ACCC 2022 In Review | Development
In 2022, the ACCC focussed on detecting, investigating and stopping anti-competitive behaviour and unfair business practices affecting the commercial development and construction sector, in particular serious cartel conduct, exclusive dealing, agreements and concerted practices which substantially lessen competition. The ACCC had some success in achieving its goal this year by having a number of cartel matters before the Court in 2022 in the development and construction sector, notably being successful in its enforcement against the CFMMEU and Hutchinson.
The ACCC also announced a focus on public sector procurement following an ACCC investigation where departmental processes contemplated cooperation by competing businesses on government tenders. The ACCC is concerned that some public servants and businesses may not be sufficiently aware of the risk of breaching cartel laws and has warned public sector agencies to be alert to the potential for collusion between bidders during procurement processes.
Legislative changes to affect developers – unfair contract terms
The introduction of amendments to competition law under the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) will impact many developers who previously were not caught by the unfair contract regime will now be caught. The changes made expands the class of contracts that are covered by the unfair contract terms. Now contracts with businesses which have up to 100 employees or less than $10 million annual turnover are captured. This means that developer standard form contracts that previously fell outside of the regime are likely to be required to comply with the new prohibition.
The changes also mean that unfair terms will not just be void and large penalties could apply. For body corporates, this will be the greater of $50 million (a fivefold increase from the previous maximum of $10 million), three times the value of the benefit obtained or 30% of adjusted turnover during the ‘breach turnover period’ (increasing from 10% of annual turnover in the 12 months prior to the conduct). For individuals, the penalties will be $2.5 million (up from $500,000). The new penalties will apply to any conduct occurring from 10 November 2022, meaning that businesses are now exposed to significantly greater financial consequences if they fail to comply with the CCA and ACL.
There is a 12-month grace period for the prohibition against proposing, applying or rely on unfair contract terms in standard form consumer or small business contracts will come into force on or around 10 November 2023. See our Unfair Contract Terms section for more information.
Key enforcement activity
ACCC v J Hutchinson Pty Ltd (ACN 009 778 330) & Anor
On 4 December 2020, the ACCC instituted Federal Court civil proceedings against construction company Hutchinson and the CFMMEU over alleged boycott conduct at a building site in Brisbane at which Hutchinson was the head contractor. The proceedings related to an understanding in 2016 between Hutchinson and the CFMMEU, in which Hutchinson agreed to terminate the contract of an independent waterproofing subcontractor, Waterproofing Industries Qld Pty Ltd (WPI), working at a construction project in South Brisbane.
The ACCC alleged that Hutchinson terminated WPI because WPI was not covered by an enterprise agreement with the CFMMEU and Hutchinson wanted to avoid conflict with, or industrial action by, the CFMMEU at the project site. The boycott arrangement was made or arrived through, or inferred from various meetings, conversations and emails between May 2016 and 26 July 2016 between the Hutchinson project manager responsible for the project, a Hutchinson team leader, the CFMMEU organiser responsible, the CFMMEU delegate for the project and WPI.
Hutchinson ceased acquiring waterproofing services from WPI in or about June 2016. As a consequence, work on the project was delayed. In or around July 2016, Hutchinson contacted Spanos (QLD) Pty Ltd (Spanos) (a waterproofing company that had a CFMMEU agreement) to see whether Spanos could start working on the project the next day. A representative of Spanos was inducted on the project on or about 13 July 2016 and Spanos carried out waterproofing work on the project thereafter. Subsequently on 26 July 2016, Hutchinson terminated the waterproofing subcontract with WPI.
On 14 February 2022, the Federal Court found that by making and acting on the boycott arrangement, Hutchinson had entered into and given effect to an agreement affecting the acquisition of services by WPI. Further, that the CFMMEU had effectively been an accessory to that conduct. Subsequently, in August 2022, the Federal Court ordered the CFMMEU and Hutchinson to pay penalties of $750,000 and $600,000, respectively.
ACCC v ARM Architecture
Bid rigging for public sector tenders and collusive activity was brought to light in September 2022 when the ACCC commenced civil proceedings in the Federal Court against Ashton Raggatt McDougall Pty Ltd (ARM) and its former managing director, Anthony John Allen. In those proceedings, the ACCC allege that ARM and Mr Allen engaged in cartel conduct by attempting to rig bids for the tender for a building project at Darwin’s Charles Darwin University (CDU). Mr Allen is said to have done so by contacting the other architectural firms requesting them not to submit a bid for the second phase of the CDU project. Once CDU became aware of the alleged conduct, ARM was excluded from consideration for the second phase of the building project.
ARM and Mr Allen are defending the claims and the case will be listed before the Federal Court at a date to be set. See our Cartel Conduct section of this report for further information on these proceedings.
This case serves as a kind reminder to all professional services firms, including those in the construction sector, that Australia’s cartel laws apply to their businesses as they do in other sectors. Firms competing in these markets must compete fairly and ensure they do not engage in anti-competitive behaviour, including cartel conduct.
ACCC v NQCranes Pty Ltd
Unlawful sharing of customers
On 19 October 2020, the ACCC commenced civil proceedings in the Federal Court against NQCranes, alleging it engaged in cartel conduct in contravention of the CCA. NQCranes is a privately owned overhead crane company that designs, services and manufactures cranes based in Mackay, Queensland, with operations across Queensland and parts of New South Wales. It provides lifting equipment to a variety of industries, including the mining, steel and defence industries. It describes itself as Australia’s largest independent overhead crane company.
The ACCC has alleged that, in August 2016, NQCranes entered into a signed distributorship agreement with a competitor, MHE-Demag Australia Pty Ltd (Demag), which included a cartel provision known as the ‘Co-Ordinated Approach Provision’ to share the market by not targeting each other’s customers for overhead crane parts and servicing in Brisbane and Newcastle. The provision provided that,
“For Territory 2 [NQCranes] and [Demag] will operate in the Service Markets in a co-ordinated approach so that their current customers are not targeted by the other. For potential future customers the two organizations will ensure their energies are focused on the service competitors and not each other.”
Additionally, the ACCC has alleged that in meetings, phone calls and emails the companies sought to enter an agreement of ‘mutual benefit’ to both parties and that the non-targeting of each other’s customers in Brisbane and Newcastle was a key part of that agreement.
Following enforcement action commenced by the ACCC in October 2020, NQCranes admitted that this clause had the purpose of sharing potential clients located in the relevant areas between it and Demag, and of ensuring that neither party targeted each other’s current customers, in contravention of ss 44ZZRD(1) and 44ZZRJ of the CCA. The ACCC did not commence proceedings against Demag, suggesting it was the immunity applicant that first brought the matter to the ACCC’s attention.
In November 2022, the Court ordered that NQ Cranes pay a $1 million penalty. In a media release at the time, ACCC Commissioner Ms Liza Carver said
“Businesses are reminded that the ACCC will investigate and take appropriate enforcement action not just against large corporates or multi-nationals. We will carefully examine any allegation of attempts to interfere with free competition by engaging in cartel conduct, and we encourage businesses which have concerns about activities in their markets to contact us confidentially.”
Cartel conduct remains a critical component of the ACCC’s competition portfolio and will continue to be an enduring priority for the ACCC. While the ACCC brought six cartel matters before the Court, the ACCC continued to investigate a number of other cartel matters in 2022, which we anticipate to evolve into further prosecutions in 2023. Notably, we eagerly anticipate the listing of the case against ARM Architecture.
Beyond cartel conduct, we expect that the ACCC will continue to enforce competition in commercial construction. In particular, following the finding that both the CFMMEU and Hutchinson had engaged in a boycott, we anticipate that the ACCC will closely monitor how the construction sector operates in Australia in 2023 including having more of a focus on public sector procurement processes and bid rigging for tenders.
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