Thursday, 16 November 2017

Australian Competition Commission Investigating Construction

Increasing Focus on Building and Construction



In early 2017 the Australian Competition and Consumer Commission (ACCC) put the building and construction industry on its priority list, which identifies industries where the ACCC believes there are sufficient reasons for more intensive monitoring and investigation. As with any regulator the ACCC has limited resources, so this list indicates where those resources are being directed. In particular, unfair contract terms and misconduct were targeted as part of the key enforcement and compliance priorities for 2017.

The ACCC is an independent Commonwealth statutory authority responsible for enforcing consumer protection and fair trading laws and for promoting competition under the Competition and Consumer Act 2010. The ACCC investigates and prosecutes cartels and other types of anticompetitive conduct. Recent investigations by the ACCC into the industry include a 2015 inquiry into price fixing and cartel conduct in the Canberra construction industry and proceedings against the Construction, Forestry, Mining and Energy Union for secondary boycott conduct.

Whatever the ACCC has on the building and construction industry led to the establishment of a Commercial Construction Unit, a 14-member specialist unit to investigate alleged anti-competitive conduct in the commercial construction sector. In a press release ACCC chairman Rod Sims said the unit would allow the watchdog to focus on conduct of construction industry participants that might raise concerns under federal competition and consumer law: “The types of construction industry participants that could potentially be investigated by the unit include builders, subcontractors, unions and industry associations. The ACCC is aware that conduct in this sector has raised serious allegations of misconduct over a number of years. The unit enables a strategic focus to be given to work in this sector.

In a speech earlier this year, when the unit and its work was disclosed, Rod Sims said “We have some continuing investigations and we will put additional resources into some of those matters, and additional inquiries we have been scoping, to investigate fully some serious allegations of anti-competitive conduct.” Over 2017 the number of people in the unit has increased.

There are as yet no details of the work of the unit, led by Jane Lin, or any current investigations. However, the unit has been funded as part of the Government’s response to the 2015 Royal Commission into Trade Unions, whose report was covered in this post, which found serious issues of illegal conduct by both unions and contractors, and involvement of organized crime in the industry.

There has also been a Memorandum of Understanding signed between the ACCC and the Australian Building and Construction Commission (ABCC), another independent statutory authority, established after the royal commission by the Building and Construction Industry (Improving Productivity) Act 2016. The ABCC is primarily responsible for industrial relations and has successfully prosecuted a number of construction union officials.

The ACCC and the ABCC both have regulatory roles and responsibilities in relation to building and construction, and the work of the agencies is often complementary as they are both concerned with monitoring and reporting on the industry. The MOU identified issues where they intend to work together as:

(a) compliance with the CCA by building contractors and subcontractors covered by the Code for the Tendering and Performance of Building Work 2016 (Building Code)
(b) collusive tendering by building contractors and subcontractors covered by the Building Code
(c) other restrictive anticompetitive agreements between participants in the building and construction sectors
(d) unfair contract terms and security of payment compliance.

With the background of the Royal Commission report and the ongoing ABCC cases against the CFMEU and/or officials, the ACCC will also continue to pursue the union. Nevertheless, the Royal Commission produced plentiful evidence of illegal behaviour by contractors and developers, so the ACCC can be expected to pursue those lines of inquiry too.