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Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

Making sense of the CFMEU-MUA merger

Monday, October 19, 2015

There’s considerable reason to speculate over why Australia’s two most militant and powerful unions are merging. The construction union, the CFMEU with 90,000 members and the maritime union, the MUA with 15,000 members, are to become ‘one’.

The explanation for the merger given by the National Secretary of the MUA Paddy Crumlin on ABC News is that unions are facing great threats. The whole ‘business’ (of unionism), he says, has become a legal minefield. Better financial and legal resources can be achieved through economies of scale.

Certainly, from the CFMEU’s perspective, the CFMEU needs all the legal and financial firepower it can muster. It’s reported to have spent $2 million so far defending itself in the Royal Commission into union corruption.

The evidence mounting in the Royal Commission points overwhelmingly to a union in which the systemic flouting of the law is allegedly its normal way of operating. No one would be surprised if the Royal Commission recommended deregistration of the CFMEU.

It’s not just the Royal Commission that is giving the CFMEU grief. The Fair Work Building and Construction inspectorate established under the Gillard Government has developed a robustness of activity under the Coalition Government. Last year alone it conducted over 1000 investigations and currently has 62 legal cases on the go, with a large number against the CFMEU and/or its officials.

CFMEU officials have had right of entry permits suspended and the union has been fined $250,000 for abusive behaviour, as just two examples.

On the surface the CFMEU-MUA merger is surely motivated by a number of factors. Yes, as Crumlin says, it gives the two unions greater financial and legal muscle to defend themselves. It perhaps may also create legal complexity in deregistering the CFMEU if the CFMEU no longer ‘exists’ in the form it was when being investigated.

One area where the CFMEU and MUA are outstanding is in strategic forward thinking. The merger will presumably give them greater control within the Australian Labor Party. They will need this if they are to continue to block laws in the Senate that would make their existing activities more difficult.

But more than anything, the merger probably reflects the enormous business acumen and sophistication of the unions’ officials who know their real ‘market’. Their ‘markets’ are not their members, rather the employer businesses with whom the unions do deals.

Let me tell you a story. About five years ago I happened into conversation with a top executive of one of Australia’s port companies. I explained the strategies around running a port without unions. Yes, one of Australia’s port companies is effectively non-union and very profitable! The executive thought I was proposing the impossible, but conceded that it is being done. He then asked a question: “But how do we recruit the workers?” I was perplexed. He finished by stating: “We use the MUA to recruit our staff!”

Think about what that statement says about such companies.

The reality is that as much as they may publicly complain about unions, a significant number of Australia’s largest and most strategically placed businesses cannot conceive of operating without unions. This is particularly so in construction and maritime industries.

The reason is twofold.

First, those companies have grossly incompetent and irresponsible executives.

More importantly the unions deliver to those companies a valuable service. Unions collude with companies to suppress and/or limit competition. Business Spectator has long exposed and commented the cartel-type situation that operates in construction on (An East West wake-up call for Leighton, June 24). It’s near identical in maritime.  

‘Normal’ industrial relations games, the flouting of law and the use of intimidation, thuggery and harassment are the tools some unions use to beat up competitors of union-friendly companies. It happens particularly with the cooperation of companies that force union involvement onto their subcontractors. Every subcontractor is a potential competitor and must be kept in their place.

The FWBC are now targeting this specifically. It has a new unit investigating companies that collude with unions particularly where there are unregistered agreements.

As an example, there’s currently action against a second-tier construction firm for alleged discrimination against a subcontractor who did not have a CFMEU agreement. In fact, the FWBC has a string of successful prosecutions, including against companies for discrimination when subbies didn’t have a union agreement.

The heat is coming onto this union (anti-competition) business model. It makes sense for the MUA and CFMEU to merge. Their business models and success depend on limiting and suppressing competition in construction and maritime services. These unions are a natural fit. 

[First published in Business Spectator, October 2015]

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