$3.5 million penalties for NSW fire protection industry price fix

19 December 2003

A penalty amount was recommended to the court by FFE and the Australian Competition and Consumer Commission.  However, Justice Wilcox considered the recommended amount unacceptably low.

Justice Wilcox also ordered Mr Vito Fodera, the former NSW contracts manager for FFE, to pay a penalty of $50,000 for his role in one of the incidents of price fixing relating to the fire protection for the Angel Place office tower and recital hall in Sydney in 1997.  A penalty amount was recommended to the court by Mr Fodera and the Australian Competition and Consumer Commission. However, again Justice Wilcox considered the recommended amount unacceptably low.

Previously on 12 December 2003, the court declared by consent a number of companies and individuals had engaged in price fixing, market sharing and/or misleading conduct in making various 'cover price' arrangements with competitors on fire protection tenders between 1995 and 1999.  These arrangements were in contravention of section 45 of the Trade Practices Act 1974.

A 'cover price' arrangement is where a competitor agrees to submit a tender price they know is higher than that to be submitted by the company who wants the particular fire protection job.  

Buildings the subject of the price fixing conduct were: the Angel Place office tower and Recital Hall in Sydney, the Prince of Wales Hospital in Randwick, the Frank Hurley Grandstand at Fox Studios, the Darling Harbour Harbourside Shopping Centre, the Cargill Seed and Oil Plant at Newcastle, and the Garden City Shopping Centre at Newcastle.   No penalties were imposed by the court in relation to the tenders for the Prince of Wales Hospital and the Frank Hurley Grandstand.

Those included in the action are:

  • FFE Building Services Limited trading as Fire Fighting Enterprises and an employee, Mr Vito Fodera
  • Tyco Australia Pty Ltd trading as Wormald Fire Systems and three employees and
  • Metropolitan Fire Systems Pty Ltd, which is now a part of the Tyco Group, although was not at the time of the conduct, was also declared to have engaged in the offending conduct.

No penalties were imposed by the court against Tyco Australia Pty Ltd and its employees or Metropolitan Fire Systems Pty Ltd.

As well as imposing penalties on FFE and Vito Fodera, the Federal Court granted injunctions by consent against all the above respondents, including AFFF (Australian Fire Fighting Facilities) Pty Limited (formerly Premier Fire Protection (NSW) Pty Ltd).

Previously, on 24 November 2003, Justice Wilcox had also declared by consent that Mr James Bell, a former director of Metropolitan Fire Systems Pty Ltd, had engaged in price fixing conduct in relation to a fire protection tender for the Prince of Wales Hospital in Randwick, NSW in 1996. 

No penalty was imposed by the court against Mr Bell because of time limits. 

In determining the amount of penalty, Justice Wilcox observed:  'restrictive trade practices are inimical to a healthy competitive economy….The contravening conduct not only had the potential to deprive building contractors, and their clients, of the lowest available price for fire protection services in relation to the particular job; but also had a tendency to undermine the entire tender system in the industry'.

'This matter highlights the importance and effectiveness of the ACCC's leniency policy for companies and individuals who assist the ACCC in uncovering and prosecuting this type of collusive cartel conduct', ACCC chairman, Mr Graeme Samuel, said today.  'The ACCC investigation began as a result of the Tyco Group discovering through its trade practices compliance and training program that the conduct had occurred and voluntarily approaching the ACCC with information. By doing this, the Tyco Group has been able to take advantage of the ACCC leniency policy*, which encourages disclosure of collusive conduct on a first-come best-dressed basis'.

Justice Wilcox stated: 'If [the ACCC’s approach to leniency] leads to a perception amongst colluders that it may be wise to engage in a race to the ACCC's confessional, that may not be a bad thing'.

'Companies and individuals who continue to engage in price fixing with their competitors should bear in mind that they run the very real risk of disclosure to the ACCC', Mr Graeme Samuel, said today. 'The ACCC has stepped up its activities against cartels – which we regard as silent extortion on the Australia community.  Cartels thrive on secrecy and it is that secrecy that we must – and will – bust through the leniency policy.

'Currently, the ACCC has several matters under consideration which have come to us through the leniency policy and I expect litigation will follow early in the New Year.

'Further, the ACCC has strongly backed the introduction of criminal sanctions for executives who engage in cartel behaviour.  The rewards of a well-run cartel are very high – even greater that the multi-million dollar penalties courts can impose.  But nothing will focus the mind of an executive against engaging in a cartel than the high prospect of a stint behind bars – plus the inevitable loss of his or her reputation and diminished employment prospects'.  

The Tyco companies and employees provided a very high level of cooperation with the ACCC's investigation and these court proceedings.  As a result of Tyco's cooperation, the ACCC did not seek pecuniary penalties against it and its employees.

Release number: 
MR 281/03
ACCC Infocentre: 

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