The Australian consumer watchdog has exposed the practice of bid rigging in the building industry following a crackdown on two Sydney slate roofing suppliers that were fined by the Federal Court for engaging in cartel conduct.
First Class Slate Roofing, RAD Roofing Specialists trading as Mr Shingles and their respective sole directors have been fined a total of $420,000 for contracts secured in 2019 at Wesley College at the University of Sydney and a residential project at Bellevue Hill in Sydney’s eastern suburbs.
The Australian Competition and Consumer Commission (ACCC) says the fines were appropriate given submissions to the Federal Court regarding the personal and financial circumstances of the companies and their directors.
The businesses admitted they engaged in bid rigging for the Wesley College tender so that First Class could secure the contract to supply and install slate roofing for the Sutherland Wing of the college on the university campus.
The Federal Court heard that First Class director Scott Barton paid Mr Shingles’ director Damien Hand $10,000 to submit a higher bid for the project.
While First Class won the Wesley College tender, Mr Shingles eventually won the tender for the Bellevue Hill project. First Class also accepted the court submissions that Barton had initiated the bid rigging for both tender submissions.
As a result, First Class faced the heaviest penalties from the court with a fine of $280,000. Barton was ordered to pay $60,000, while Mr Shingles was hit with a fine of $65,000 and a further $15,000 order was made against Hand.
“The court accepted that First Class, Mr Shingles and their respective sole directors engaged in deliberate conduct that involved aspects of falsification and concealment,” ACCC commissioner Liza Carver says.
“It was also accepted that these businesses and their directors benefited from the cartel conduct which had the effect of denying their customers the benefit of genuine competitive tender offers, including the opportunity to attempt to negotiate a lower contract price for the roofing services that were provided.”
The ACCC says it currently has three criminal cartel cases and three civil cartel cases before the courts, while it continues to undertake investigations into ‘several other cases of alleged cartel behaviour’. It says bid rigging can result in higher prices for the building industry or lower quality goods or services to consumers.
The practice occurs when two or more parties agree they will not compete genuinely with each other for tenders. Some arrangements lead to companies taking turns in winning contracts. Tenders can be made less appealing with the inclusion of unreasonable terms as well as higher prices.
In this instance, both companies are engaged in slate roofing services which requires specialised skills commonly needed for the restoration of older buildings such as universities, schools and churches.
“Cartel conduct, including bid rigging as was engaged in by these firms and individuals, distorts and corrupts the competitive process and denies customers the benefits of fair competition,” Carver says.
“For this reason, cartel conduct is an enduring compliance and enforcement priority for the ACCC.”
Injunctions have also been imposed on First Class and Mr Shingles, and their directors, restraining them for three years from engaging in bid rigging conduct for the supply, installation, maintenance or repair of roofing.
Barton and Hand have been ordered to publish a notice to members of the Roofing Industry Association of NSW Incorporated about their unlawful conduct and participate in education or training programs in competition law.
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