Cementing a new record – Federal Court imposes highest ever $1 million penalty for construction industry secondary boycotts
The ACCC’s priority focus on anti-competitive behaviour in the commercial construction sector lays solid foundations for 2018
On 12 February 2018, the Federal Court imposed two $500,000 penalties on the Construction, Forestry, Mining and Energy Union (CFMEU) for preventing third parties from acquiring concrete from Boral and one of its subsidiaries in contravention of the secondary boycott provisions of the Competition and Consumer Act 2010 (Cth) (CCA). These are the highest penalties to date for secondary boycotts.
Justice Middleton delivered the judgment on liability on 5 October 2017 on a partially confidential basis due to ongoing criminal prosecutions against individuals in connection with the conduct. However, in short, the CFMEU was found to have acted in concert with the “shop steward” (that is, a union delegate) at two commercial construction sites in and around Melbourne from March to June 2013 to prevent or hinder Boral concrete from being supplied to sub-contractors.
Liability established under section 45D(1)
The CFMEU was found to have contravened section 45D(1), which prohibits what is known as a secondary boycott – this is specific conduct which is engaged in by two or more persons acting in concert for the purpose, and which is likely to have the effect of, causing substantial loss or damage to the business of the person unable to be supplied (or unable to supply goods or services). In this case, the secondary boycott was the hindrance and prevention of the third party sub-contractors from acquiring concrete from Boral, which the CFMEU engaged in:
- for the purpose of causing substantial loss or damage to Boral; and
- which would have the likely effect of causing substantial loss and damage to the business of Boral.
Justice Middleton was also required to consider the meaning of the phrase “in concert” in section 45D(1) and provided some useful guidance on what must be established to prove that a person is acting in concert with a second person. His Honour held that “to act “in concert” normally means to act in a coordinated or organised way” and “[t]here needs to be a joint enterprise to be acting in concert – there cannot be such an enterprise unless the parties have a “community of purpose””.
His Honour adopted the approach of Justice French in Australasian Meat Industry Employees Union v Meat and Allied Trades Federation of Australia (1991) 32 FCR 318 , also in relation to section 45D, which found that the phrase “in concert” involved “knowing conduct, the result of communication between the parties and not simply simultaneous actions occurring spontaneously… [I]t does not apply to groups of employees of different employers who, as the result of requests by a common union, engage in similar conduct for their own respective purposes in response to similar issues”.
It will be interesting to see whether Justice Middleton’s findings are referred to in future jurisprudence on the meaning of “concerted practice” under the new section 45(1)(c).
The Court found that the CFMEU had committed two separate breaches of section 45D(1), and imposed a $500,000 penalty for each breach (as well as ordering the CFMEU to provide s 45D compliance training). This is a high watermark, considering that the next highest secondary boycott penalty was $300,000 in total, with the three respondents each penalised $100,000 – handed down in 2003 in ACCC v Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union when unions picketed construction sites.
The $1 million penalty imposed on the CFMEU in this case demonstrates the Federal Court’s willingness to heavily sanction anti-competitive behaviour in the commercial construction industry.
ACCC’s 2018 ‘Compliance & Enforcement Priorities’ – A specific focus on competition issues in the commercial construction sector
Building on the 2017 formation of the specialist investigative Commercial Construction Unit (CCU), ACCC Chairman Rod Sims highlighted competition within the commercial construction sector as a 2018 priority for the ACCC in his annual CEDA address. This includes investigating allegations of cartel conduct, other types of potentially anti–competitive arrangements, undue coercion, unconscionable conduct and unfair contract terms.
In 2018 we can expect to see further enforcement activity in this space given that Mr Sims specifically foreshadowed that:
“In addition to its investigations and the assessment of new issues that come to our attention, in 2018 the CCU is likely to see the conclusion of a number of its investigations, including through enforcement action.”