$9.1 million penalties for bid-rig, price-fix cartels

Penalties of more than $9.1 million have been imposed on 11 companies and 18 individuals for a series of bid-rigging and price fixing cartels in commercial air conditioning after Australian Competition and Consumer Commission Federal Court action.

Justice Nicholson, in the Federal Court, Perth late yesterday handed down various orders, including penalties totalling $9,192,000. He declared that a number of companies in the commercial air conditioning and mechanical services industry had engaged in illegal bid-rigging and price-fixing cartels in breach of the Trade Practices Act 1974.

The cartels existed between 1991 and June 2003. It involved companies tendering for commercial air conditioning and mechanical services projects in Western Australia agreeing on which would submit the lowest price for particular jobs and therefore be likely to win the tender.

"The companies and individuals involved in the cartels had covert meetings and telephone conversations over many years to rig the outcome of competitive tenders that totalled about $129 million," ACCC Chairman, Mr Graeme Samuel, said.  

"They represented nearly every major commercial mechanical services contractor in WA. The cartels covered contracts from as small as $46,000 to $9.4 million.

"A sample of projects subject to collusive arrangements includes: AMP Refurbishment ($9.49 million), CSIRO - Petroleum and Minerals, Bentley ($5.23m), Belmont Shopping Centre ($2.67m), UWA Electronic/Electrical Engineering ($919,800), Nickol Bay Hospital - Chillers Replacement ($568,200), Chisholm Catholic College ($654,383), Rydges Hotel Chiller ($211,000) and Murdoch University Education and Humanities ($280,510)."

"But it is the Australian consumer who is ultimately disadvantaged by price-fixing conspiracies through having to pay higher prices or taxes than they would otherwise have to.

"The individuals subject to penalties were directors or senior managers of the corporate respondents who represented their companies in making the illegal arrangements."

The penalties imposed by the court are set out below:

Respondent	Penalty
Admiral Mechanical Services Pty Ltd	$49,000
Mr Steven Nelson (director of Admiral Mechanical Services Pty Ltd	$5,250
AMEC Engineering Pty Ltd	$225,000
Mr Desmond Barrie (Director of AMEC Engineering Pty Ltd)	$15,000
Centigrade WA Pty Ltd	$1,200,000
Mr Christopher Smith (Director of Centigrade WA Pty Ltd)	$70,000
CMS Engineering Pty Ltd	$450,000
Mr Richard Jones (Managing Director of CMS Engineering Pty Ltd)	$20,000
Mr Wayne Redfern (former director for CMS Engineering Pty Ltd and former state manager for Tyco Australia Pty Ltd )	$45,000
Direct Engineering Services Pty Ltd	$1,500,000
Mr Lorentz Henny (former general manager and director of Direct Engineering Services Pty Ltd)	$25,000
Mr John Allen  (former general manager and director of Direct Engineering Services Pty Ltd)	$25,000
HVAC Construction Limited	$2,740,000
Jako Industries Pty Ltd	$750,000
Velco  Jakovich (director of Jako Industries Pty Ltd)	$39,500
LL Nominees Pty Ltd	$210,000
Mr Paul Blinco (director of LL Nominees Pty Ltd and former senior manager of AMEC Engineering Pty Ltd)	$35,000
Mechanical Project Management Pty Ltd	$1,490,000
Mr Horace Pierce (Director of Mechanical Project Management Pty Ltd)	$60,000
Mr Ian Ferguson (Director of Mechanical Project Management Pty Ltd)	$60,000
Ralie Pty Ltd	$70,000
Mr Barry Broadley (director of Ralie Pty Ltd)	$7,000
Mr Peter Moore (director of Ralie Pty Ltd)	$7,000
Scott Mechanical Services Pty Ltd	$75,000
Mr Peter Scott (director of Scott Mechanical Services Pty Ltd)	$7,000
Mr Martin Roche (former State Manager of Haden Engineering Pty Ltd)	to be determined
Mr Colin Lewis (former senior employee of HVAC Construction Limited and Centigrade WA Pty Ltd)	$5,250
Mr Trevor Ballantyne (former employee of HVAC Construction Limited)	$3,500
Mr Graeme McLeod (former senior of Mechanical Project Management Pty Ltd and HVAC Construction Limited)	$3,500

The ACCC did not seek penalties against the respondents Envar Engineers and its directors Mr Peter Healey and Mr Joseph Burmaz.   The respondent AMEC Australia Pty Ltd was involved in collusive conduct more than six years before proceedings were instituted and therefore was not subject to a pecuniary penalty.
 
"The court's decision marks its strong disapproval of such widespread and long running collusive practices within the mechanical services industry in Western Australia," Mr Samuel said. "It is a clear message that anyone involved in a cartel will be liable for a substantial pecuniary penalty.

"This case again demonstrates the ACCC's continuing commitment to prosecute those who seek to subvert Australia's system of free and open competition by restraining trade.

"The consequences of participating in a cartel will be even more serious when the Government amends the Trade Practices Act to criminalise hard core cartel behaviour and provide for individuals to be jailed for their involvement in that conduct."

Each of the respondents, aside from HVAC (in liquidation), admitted their involvement in the unlawful conduct and cooperated with the ACCC. HVAC is in liquidation and did not oppose the ACCC's allegations against it.

The court is yet to consider the allegations against the respondents Haden Engineering Pty Ltd, Norfolk Group Holding Pty Ltd and Tyco Australia Pty Ltd (all companies being part of the Tyco group) or Building Services Pty Ltd (previously called Designair Engineers Pty Ltd) and its directors, Mr Steven Cygulis and Mr Lindsay Albonico. The ACCC has not sought penalties against the Tyco companies or Building Services Pty Ltd.

Background

The ACCC instituted proceedings in the Federal Court, Perth, against 17 companies and 22 individuals for alleged price-fixing and other anti-competitive conduct regarding tenders for the supply and installation of commercial and industrial air conditioning and mechanical services in Western Australia.

The ACCC alleged that the companies breached the Act by entering into arrangements or understandings which involved some or all of the various parties agreeing which company among them would submit the lowest tender price for particular commercial projects let for tender.

For periods from 1997 to June 2003 some respondents who were members of the Air Conditioning and Mechanical Contractors' Association of WA would attend regular weekly meetings at the AMCA premises at which they discussed upcoming tenders and endeavour to agree which tenderer would be designated to submit the lowest price.

The companies gave effect to the agreements by providing and accepting 'cover' prices. It is alleged the conduct generally involved the supply and installation of air conditioning and mechanical services on major construction projects, both private and public.

It is also alleged that the conduct took place up until around 2003 and that some of the companies had been engaging in the conduct since the early 1990s.