Mike Nahan’s radical appeal to the ACCC over building industry collusion

A letter has bolstered the WA Treasurer’s radical plan to attack alleged collusion in the state’s building industry.

Treasurer Mike Nahan delivering the 2016-17 Budget in the West Australian Parliament.

While the wrangle over the restoration of the Australian Building and Construction Commission continues in Canberra, the Western Australian Treasurer, Mike Nahan, has embraced a radical new step to avoid an enormous blow out in WA infrastructure costs.

Whereas the Federal Government is attacking unions, the WA government has woken up to the fact that unions are merely the hubs in restrictive trade practice deals being made among builders to boost their profits. Accordingly, he aims to bypass the unions completely and go to the core of the problem — the alleged collusion between the large builders to boost construction costs.

According to a report in The West Australian newspaper, Nahan has asked the Australian Competition and Consumer Commission (ACCC) to investigate alleged collusion between Probuild, Brookfield, Multiplex, Lendlease and one other large builder.

It’s not easy for the chief of the ACCC, Rod Sims, to use ACCC powers to stop actions by companies to increase prices and profits via collusion when they use a union as the negotiating hub (Beware the concentration of corporate power, October 27)

But Nahan struck it lucky. In WA the CFMEU sent out a letter that calls big builders to action asking them to work together to raise prices and lift their profits via doing a deal with the CFMEU.

The key was that the letter emphasised the need to lift charges to customers and the profits of big builders and to prevent competitive builders from reducing prices. It’s an amazing letter — you can read it in full here.

But in fairness, the letter only reflects normal practice in the eastern states, which has boosted construction costs by about 20 to 30 per cent.

But Nahan has not found the going easy in WA. Last May, Nahan pointed out to a small business group that builder-union collusion had been uncovered by the Heydon Royal Commission. The Royal Commission revealed that unions decided who could be a subcontractor and set the rules for their tender. Usually the large builder was able to change the terms of the contract with the small players.

Nahan said that WA’s first step would be to introduce a code of conduct similar to the Federal code, which would aim to stop building companies colluding with unions in power sharing agreements that boosted the cost of government work.

WA would then support that code with a requirement that all those who tendered for WA work would have to give an undertaking that their agreements with small contractors would not give the large builders the unilateral ability to change the prices and the terms of contracts. In essence, WA would follow the requirements of the Commonwealth’s unfair contracts legislation (WA’s radical plan to end building-union collusion, May 6).

That was back in May and nothing has happened. The Western Australian election is to be held next year, so time is running out for legislation but a small business protection code is still on the agenda.

Indeed, while it is not top of the ACCC agenda, the current building subcontracts include many unfair clauses that are void under the unfair contracts legislation which came into operation on November 12. (Big business needs to get with the contract overhaul program, November 11).

And there is some good news. Lendlease signed a wage agreement with the CFMEU which does not include all the normal restrictive trade practices that are usually part of such union hub agreements. Instead, it’s all about wages, which is a legitimate area for unions and large companies to agree on. Indeed, in the old days, higher wages was what unions were all about.

Now, at least in industries like building and retail, it’s about running a union business and raising money for the union and the ALP from employers.

Of course, the key to the latest Lendlease deal will be whether Lendlease includes “unfair contract” clauses in its subcontractor agreements.

If the Federal government fails to pass the ABCC and associated legislation, then it will need to rely on the unfair contracts legislation and the ACCC to avoid a blow in construction costs. That’s why the WA Treasurer’s appeal to the ACCC was so important.