ACCC’s designs on ARM Architecture to be heard in April
A date for a hearing has been set in the ACCC’s suit against architecture firm Ashton Raggatt McDougall Pty Ltd (ARM) and its former managing director Anthony Allen (Allen). The matter has been listed for an estimated half-day hearing on 13 April on the question of ARM and Allen’s liability and penalty for alleged attempted cartel conduct. The case focussing on an “attempt” is particularly interesting because there have been very few attempt cases prosecuted by the ACCC to date, and many have been only prosecuted in recent years. (See for example BlueScope and Alkaloids).
ARM are well-known for their striking public design projects such as the redevelopment of Hamer Hall in Melbourne. However, in September last year, the ACCC announced it had its own designs on ARM and Allen, by bringing a proceeding in Federal Court alleging that both parties had sought to rig bids for a building project at Charles Darwin University (CDU) in September 2020. At the time of the ACCC’s announcement, the suit against ARM garnered interest from both the mainstream and architectural press, as well as from the Architects Registration Board of Victoria which stated it would be following the proceedings “closely”.
The Allen emails: a strong foundation for the ACCC’s Case?
The ACCC’s case includes that Allen and ARM, by email correspondence sent to eight large architecture firms on behalf of ARM by Allen, attempted to ensure that the firms would not submit a tender for the second stage of a $250 million development of CDU’s Darwin CBD campus. ARM was alleged to have already completed the first phase of design work for the project.
The email correspondence sent by Allen to the eight other firms are extracted at paragraphs 7 to 16 of the ACCC’s concise statement and include the below:
1. First Email
Allen’s first email (First Allen Email) was allegedly sent to eight other architecture firms containing a “simple” request:
“Our request to you is simple. Please do not submit a tender as we are relying very heavily on continuing with this project to keep our practice alive throughout the remainder of this strange and difficult COVID time.
Perhaps this is an issue that we could discuss at a future [Large Practice Forum] meeting.”
(The Victorian Large Practice Forum is an industry group connected to the Australian Institute of Architects consisting of the eight other firms named by the ACCC).
2. Second Email
After representatives of two of the eight firms allegedly replied to the First Allen Email and confirmed they would not submit a bid, Allen sent a follow up email (Second Allen Email) to the six other firms stating:
“We have received very positive responses from Architectus and JWA. We would greatly appreciate a short note from you to let us know of your intentions either way.”
Shortly after the Second Email, a representative of one of the firms (DCM Architecture) allegedly rang Allen to confirm that while they were not interested in bidding for the project, the emails might be seen as collusion. According to the ACCC’s claim, DCM’s call was shortly followed by an email from the company managing the CDU tender process, Capital Insight. Capital Insight requested that any emails issued by ARM about the tender to the other firms be retracted. They also stated that if there had been a breach of the conditions of the tender for the CDU project, a retraction may be a factor that would influence any subsequent decisions made by CDU.
The events that followed the Second Email above appear to have prompted a third email, sent to all eight other architecture firms:
Legal grounds for the ACCC’s claim
ARM was ultimately excluded from the remainder of the bid process by CDU and Capital Insight who, according to the ACCC’s Concise Statement, considered that the First Email constituted “anti-competitive conduct, unethical conduct and prima facie evidence of conduct which may constitute collusive tendering”. Exclusion from the bid process may now be the least of ARM and Allen’s concerns – given the ACCC now alleges that Allen’s emails amounted to an attempt at cartel conduct.
Specifically, the ACCC alleges that by the First and Second Allen Emails, ARM and Allen attempted to make or induce the making of, arrangements or understandings with each of the eight other architecture firms containing a cartel provision. The cartel provision was that ARM would bid, but each of the respective eight firms would not bid, for the CDU project.
Depending on the outcome of what appears to be an agreed settlement with the ACCC, ARM faces a maximum penalty of the greater of $10 million, or 10% of its annual turnover, while Allen may face, among other things, a fine of up to $500,000 (noting that the conduct was alleged to have occurred before the changes to the penalty regime in November 2022: see our blog post here).
ACCC building priority on action against cartel conduct in construction
Some of the ACCC’s recent court actions have focused on cartel conduct in the construction industry. These actions include:
- A civil claim against NQ Cranes for making a contract or arrangement containing a cartel provision, which resulted in an agreed a pecuniary penalty of $1 million in November 2022. You can find our analysis of that case here.
- A civil claim against First Class Slate Roofing and RAD Roofing Specialists and their managing directors for bid-rigging in relation to slate roofing projects in Sydney which resulted in penalties totalling $420,000.
Aside from court proceedings, the ACCC has also brought enforcement action for alleged cartel conduct in the construction industry, including in scenarios where that conduct is alleged to take place via social media. Relevantly, in December 2019 the ACCC obtained enforceable undertakings from two Sydney roofing companies for alleged cartel conduct in relation to social media posts by the companies’ respective directors.
The director of ANZ Roofing Pty Ltd admitted to posting the below following a damaging hailstorm in Sydney in 2018:
“I think this latest storm is the perfect opportunity for the roofers of Sydney to increase pricing across the board as a standard that doesn’t decrease!”
ANZ Roofing Pty Ltd and the director admitted that the post likely constituted an attempt to make, or induce the making of, a contract or arrangement, or arrive at an understanding, with an actual or potential competitor that contained a “cartel provision”.
Similarly, and on the same day, Ivy Contractors Pty Ltd and its director accepted posting the following reply to the initial post above, likely constituted an attempt to contravene, or induce a contravention of the price-fixing provisions in s 45AJ of the Act:
“Let’s all agree that we start from $65 and go up”
As noted by the ACCC Chair Gina Cass-Gottlieb in her recent speech to CEDA, cartel conduct remains an “enduring priority” for the ACCC. The ACCC has successfully brought criminal prosecutions, civil proceedings and enforcement action in a variety of industries in recent years.
In addition to those in the construction industry, the ACCC’s actions include proceedings in respect of cartel conduct:
- in waste services – such as the prosecution of Bingo Industries, Aussie Skips, and their respective (former) managing directors. These parties are currently awaiting sentencing after pleading guilty to criminal cartel offences relating to price fixing for demolition waste services in Sydney.
- in the context of tenders, more generally. For example, in December 2022, the ACCC announced proceedings against Qteq, a mining equipment and technology services company, alleging seven instances in which Qteq attempted to induce competing businesses not to supply their services and to rig a tender.
We expect the ACCC to continue focus on detecting and deterring cartel conduct, including in the construction industry and in respect of tenders generally, in future investigations and enforcement action. We also watch with interest the ACCC’s growing body of ‘attempt’ cases.
We’ll report back after next week’s hearing.
Image credit: Institute of Aboriginal and Torres Strait Islander Studies in Canberra. Designed by Ashton Raggatt McDougall / Author Elekhh / Wikimedia Commons / CC BY-SA 3.0 / Remixed to black and white and resized.