ACCC is suing Downer EDI and Ventia for allegedly colluding over defence contract mark-ups

Four senior executives at Downer and Ventia have been named in legal action for allegedly colluding on defence contracts worth nearly $10bn during the pandemic.

ACCC chair Gina Cass-Gottlieb says the alleged cartel conduct caused harm to the Commonwealth and taxpayers.

Executives from Spotless and Ventia communicated on “several occasions” about seeking more money from the Department of Defence for work to be delivered as part of the Federal Government’s pandemic stimulus response, the competition regulator has alleged.

The Australian Competition & Consumer Commission has started civil proceedings against Spotless Facility Services - a subsidiary of listed firm Downer EDI - and Ventia Australia - part of the listed Ventia Services Group - for alleged price fixing relating to estate management and operation services for the Department of Defence.

Spotless senior executives Jacob Bonisch and Jeffrey Collins and Ventia senior executives Gavin Campbell and Lena Parker are also alleged to be involved in aspects of the conduct.

Downer said on Thursday it “categorically denies” the allegations and will vigorously defend the proceedings.

Ventia said it was reviewing the detail of the allegations and “at this stage does not intend to comment further on the proceedings’’.

The ACCC’s concise statement, lodged with the Federal Court, says that between April 2019 and August 2022, Spotless and Ventia “made, attempted to make, or attempted to induce another to make’’ arrangements which would fix the price of services which each supplied to Defence.

In one case, the ACCC says, executives from Spotless and Ventia “communicated with each other on several occasions about seeking additional compensation from Defence beyond ... mark-up’’, for works known as STIM20, which were to be undertaken by small to medium enterprises as part of an economic stimulus program during the pandemic.

It is alleged that the companies discussed their concerns about additional project management costs associated with the works and whether they could recover those costs.

It is alleged that they each then separately approached Defence on several occasions asking for more compensation.

The companies also attempted to collude on two other packages of work, the ACCC alleges.

Spotless and Ventia are currently delivering EMOS contracts to Defence worth about $4bn and $5.8bn respectively, across more than 200 Australian Defence Force bases and other properties, according to the ACCC statement.

The penalties for the alleged conduct would be the greater of: $10m; three times the total benefit obtained, or if that cannot be determined; 10 per cent of the annual turnover of the body corporate during the 12 months in which the conduct occurred.

“The 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,’’ the ACCC said on Thursday.

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

“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.”

ACCC chair Gina Cass-Gottlieb said the companies were both “large, sophisticated companies providing services which are 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.

“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.

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

Originally published as ACCC is suing Downer EDI and Ventia for allegedly colluding over defence contract mark-ups