The Federal Court in Brisbane has found that three Queensland based construction companies engaged in price fixing and misleading or deceptive conduct in tendering for Government public works projects in Queensland.
“The decision of the court is an extremely important one and follows the ACCC’s decision to pursue cover pricing as a form of cartel behaviour. Cartels damage the Australian economy, raise prices for consumers in this case taxpayers and hurt businesses that play by the rules.” ACCC Chairman Rod Sims said.
The court found that between 2004 and 2007, T.F. Woollam & Son Pty Ltd, J.M. Kelly (Project Builders) Pty Ltd and Carmichael Builders Pty Ltd engaged in ‘cover pricing’ in relation to the tenders for four construction projects.
This practice, which has developed within the building industry over many years, is allegedly used in situations where a construction company may not have the time, resources or inclination to prepare an accurate tender, but still wants to be seen as tendering for the project.
Cover pricing is a form of 'bid rigging' which involves a tender price being sought by construction company A from construction company B during a tender process. Both companies understand the cover price will be high enough to ensure that company A will not win the contract. Company A submits the cover price tender as a "genuine" tender. Company B has a better chance of winning the bid because its bid is under the cover price.
The court found that this conduct “amounts to controlling of the price at which services are to be supplied”.
“It is crucial for the proper functioning of business in Australia that the ACCC continues to tackle cartel conduct with the full force of the law,” Mr Sims said.
The distortion of the competitive tender process by cartel conduct may exclude legitimate competitors and pass on higher costs to customers.
Cartel conduct includes:
- price fixing
- allocation of customers or territory
- agreements on market share, or
- profit sharing.
The court also found that managing director of T.F. Woollam & Son, Mr George Bogiatzis, and Construction Manager of J.M. Kelly, Mr John Murphy, were parties to the contraventions.
“It is also important to note that the conduct was also found to be misleading or deceptive as each company represented during the tendering processes that they had no knowledge of the price of any other tenderer and had not collaborated with another tenderer on price without the consent of the client. “ Mr Sims said.
Justice Logan adjourned the matter to a date to be fixed for the hearing of submissions on penalties and other orders.