Defence contractors Spotless, Ventia deny ACCC’s cartel case

Department of Defence contractors Spotless and Ventia have denied price fixing accusations brought by the ACCC which has submitted texts between the key players as part of its case.

ACCC chair Gina Cass-Gottlieb. Picture: John Feder

“Good we have 12 per cent now,” the BGIS staffer allegedly texted.

His counterpart at Spotless allegedly replied: “Same.”

These text messages detailed in a court document filed by the Australian Competition and Consumer Commission go to the heart of a cartel case brought by the regulator and defended by Spotless, which is owned by ASX-listed Downer, and its co-accused Ventia.

The Department of Defence contractors are alleged to have conspired to push up their prices, which they deny, for everyday services like laundry, catering and pest control.

For the first time, the substance of their defence can be reported.

The ACCC statement of claim lodged on Christmas Eve also makes allegations about another operator, BGIS’s role, in the alleged attempt to increase fees between April 2019 and August 2022.

But BGIS, which was sold by Brookfield in 2019 for $1bn to CCMP Capital Advisors, is not a party to the case, and not listed as a respondent.

The competition cop alleged between April 30-May 1, 2019, Spotless made an arrangement with BGIS to tell Defence it would apply a mark-up of 10 per cent on the value of estate management and operation services.

Spotless expressly denies this, according to its defence.

Spotless and Ventia are currently delivering so-called EMOS (estate maintenance and operations services) 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.

Defence told contractors it intended to allocate at least $15m in funds to the “EMOS providers” for particular works to be delivered before the end of the 2018-19 financial year, according to the statement of claim.

The providers were not entitled to more than a 10 per cent mark up on the value of work, it further alleged.

Defence executive Shane Brassington emailed a number of contractors on April 30, 2019 and said: “opportunity funding is for estate improvement and not designed to give EMOS a commercial windfall come EOFY”.

It is then alleged that BGIS executive Bradley Robbins texted Spotless executive Jeffrey Collins the same day beginning the following exchange: “Mate did you see the email from DEPU, we shouldnt [sic] be doing works for no costs”.

Mr Collins: “We are holding the line.”

“Same so you charge standard 10 per cent Project fee yes”.

“yep”.

The 64-page statement of claim concludes the text chat with the alleged last word from Mr Robbins: “Good its [sic] a bit rich isn’t it”.

As well, the ACCC claimed by May 4, 2020, Spotless and Ventia “made an arrangement or arrived at an understanding with each other and BGIS” they would each offer Defence supply of a “large” volume of work on estates to be completed under a Covid-19 economic stimulus plan.

“In or around late April and early May 2020, representatives of the EMOS Providers had telephone conversations in which they discussed seeking, and understood each EMOS Provider would seek, a greater than 10 per cent mark-up from Defence,” the ACCC pleading alleged.

It went on to identify a number of discussions that allegedly took place between Mr Collins, Mr Robbins and Ventia executive Gavin Campbell.

The ACCC alleged that after Defence rejected an offer from Spotless executive Jacob Bonisch for a “mark-up of 12.75 per cent on project value”, Ventia wrote to Defence about the same job and offered a 10 per cent mark up.

Ultimately, all three providers were offered a mark-up of 12 per cent. The ACCC claimed that between 3.23pm and 3.37pm on the afternoon of May 12, 2020, Mr Robbins texted Mr Collins and said: “Good we have 12 per cent now”. Mr Collins allegedly replied: “same”.

Spotless and Ventia deny making an arrangement or arriving at an understanding with Ventia and BGIS “that they would each offer to Defence to supply the STIM20 Works at a greater than 10 per cent mark-up”.

Around May 13, 2022, Defence requested contractors start to deliver energy savings.

The regulator claimed the contractors “collaborated about a proposal to Defence to deliver a national energy program involving energy saving initiatives such as the installation of LED lighting, heat pumps, variable speed drives and smart meters”.

The estimated program cost for the energy saving works was about $291m, comprising $117.7m for Ventia, $130.4m for Spotless and $43m for BGIS.

During a meeting on August 23, 2022, the ACCC alleged Ventia executive Lena Parker said to Mr Collins and BGIS executive Thomas Haszard words to the effect that the contractors should jointly ask Defence to pay them a project management fee.

“Parker said words to the effect that the EMOS Providers should all go to Defence with a collective project management request,” the ACCC alleged.

“The EMOS Providers should go to Defence together and lobby for a program management fee,” Ms Parker allegedly conveyed, and “the EMOS Providers should jointly ask Defence for more money for program management” the statement of claim asserts. Ventia denies this allegation and in her defence, Ms Parker claimed “privilege against self-exposure to a penalty and in reliance on that privilege does not admit allegations in the statement of claim”.

Mr Bonisch, Mr Collins, and Mr Campbell also did not admit to the allegations made against them and claimed relevant privilege.

The penalties sought by the ACCC are the greater of $10m, three times the total benefit obtained, or 10 per cent of the annual turnover of the company when the conduct occurred.