ACCC sues over alleged price-fixing cartel for ADF base-services contracts

ACCC has started civil cartel proceedings in the Federal Court against two companies and four senior executives for alleged price fixing relating to estate maintenance and operation services for the Department of Defence.

FILE PHOTO: A Ventia firetruck conducts a firefighting demonstration at RAAF Base Pearce in Western Australia. Photo by Flying Officer Michael Thomas.

Spotless Facility Services Pty Ltd (a subsidiary of Downer EDI Limited – ASX: DOW) and Ventia Australia Pty Ltd (a subsidiary of Ventia Services Group Limited ASX: VNT) are being accused of price fixing on billions of dollars worth of Defence contracts.

Spotless and Ventia each provide services to Defence under separate billion-dollar contracts to over 200 major ADF bases and other properties across Australia, including Lavarack Barracks, Victoria Barracks, Royal Military College Duntroon, Puckapunyal and numerous RAAF bases.

ACCC alleges that on three occasions between April 2019 and August 2022, Ventia and/or Spotless made or attempted to make arrangements or understandings containing provisions which had the purpose, effect or likely effect of fixing, controlling or maintaining the prices at which these services would be supplied to Defence under specific programs of works.

ACCC alleges this is a breach of the cartel provisions in the Competition and Consumer Act.

A cartel exists when businesses agree to act together instead of competing with each other.

It is alleged that during this period on various occasions, Spotless is alleged to have given effect to two of the arrangements or understandings, and Ventia is alleged to have given effect to one of the arrangements or understandings.

Senior executives Jacob Bonisch and Jeffrey Collins who are employed within the Spotless corporate group, and Ventia senior executives Gavin Campbell and Lena Parker are also alleged to be involved in aspects of the conduct.

ACCC Chair Gina Cass-Gottlieb said the allegations in this case related to alleged conduct by two large, sophisticated companies providing services which were critical to the operation of Australian Defence facilities under longstanding, publicly funded Defence procurement contracts.

“We allege this conduct caused direct harm to the Commonwealth and ultimately Australian taxpayers,” the ACCC Chair said.

“One of the programs of work that we allege was the subject of a price-fixing agreement related to a program funded by the Australian government to stimulate work for small to medium enterprises during the COVID-19 pandemic, when many individuals and businesses were experiencing financial hardship.”

The ACCC is seeking declarations, civil penalties and costs against the companies, as well as the four senior executives, and also disqualification orders against three of them in relation to the alleged conduct.

Ventia and Spotless hold separate contracts with Defence for estate maintenance and operation services which are known as Defence Base Services Contracts.

ACCC understands the current contracts are due to expire in around mid-2025.

ACCC said the alleged conduct in this case occurred without Defence’s knowledge and was allegedly engaged in by service providers who were trusted suppliers of services to Defence.

These Base Services Contracts provide for Defence to issue work orders relating to specific programs of works or opportunities, such as those which are the subject of these proceedings.

For conduct such as the alleged conduct which occurred before 9 November 2022, the maximum civil penalty which may be ordered by the Court for breach is the greater of:

• $10 million,
• if the court can determine the total value of the benefits that have been obtained by one or more persons and that are reasonably attributable to the act or omission – three times the total value of the benefits, or
• if the Court cannot determine the total value of the benefits, 10 per cent of the annual turnover (as defined) of the body corporate during the 12 months ending at the end of the month in which the act or omission occurred.

The maximum civil penalties for cartel conduct by corporations were substantially increased from 9 November 2022.

 

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