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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.

Royal Commission: Shorten actions look corrupt

Friday, July 10, 2015

What’s becoming apparent from the royal commission into union corruption is something that’s bigger than just identifying corrupt individuals.

A picture is emerging that the way major business is routinely done in Australia is systemically ‘‘corrupt’’. Yes, that money changes hands for questionable favours.

Worse, that potentially corrupt behaviour is not illegal.

The issue is that the principles and practices of fair and equitable competition are thwarted by industrial relations laws and practices. The competition regulator appears to be a neutered bystander.

In summary, unions enter employer-friendly enterprise agreements with favoured businesses (normally big businesses) that give those businesses competitive advantages. The favoured businesses make payments to unions in return. Businesses in competition with the favoured businesses are denied such deals and/or are harassed by the union or unions.

The onion un-peeling on the extent of this really started in mid-2014. The giant transport company Toll had a senior legal executive admit before the royal commission that Toll had a secret agreement with the Transport Workers Union. That agreement required Toll to pay $150,000 a year to a wholly owned subsidiary “training” company of the TWU.

For $50,000 a year the agreement required the TWU to conduct cost “audits” of named Toll competitors. The TWU was to use its IR powers to enter business premises, without warrant, to inspect and copy records, call work to a halt and/or apply “other compliance measures”.

The TWU was to force competitors on to the same cost structures as Toll. It would be easy to allege that this amounted to collusion between Toll and the TWU for the purposes of anti-competitive outcomes.

Following considerable media pressure the Australian Competition & Consumer Commission launched an investigation into whether it would prosecute over the deal.

On June 16 the ACCC decided not to prosecute. Its reasoning was that there was no “substantial” lessening of competition and no competitors complained. That is, that the payment of money to a union to harm competitors is “legal” or at least not illegal.

But there’s more. Around the time the Toll-TWU deal was exposed, the TWU applied to the ACCC for approval to collectively bargain with Toll on behalf of owner-drivers.

Owner-drivers operate under commercial law and so collective bargaining has to be authorised by the ACCC. The ACCC has handled many such applications by unions and routinely authorises the deal making process. It granted the TWU-Toll application.

However there’s a problem. The competition act, the Australian Consumer Law, seems to prevent unions even making application for collective bargaining. The explanatory memorandum to the legislation states:

“Subsection 93AB (9) provides that a purported collective bargaining notice is not valid if it is given, on behalf of the corporation, by a trade union, an officer of a trade union or a person acting on the direction of a trade union.”

Further, the second reading speech on the bill (February 5, 2005) is highly specific in its instruction to the ACCC stating:

“In considering public benefit and detriment, the ACCC will have particular regard to the government’s intention that the collective bargaining provisions not be used to pursue matters affecting employment relationships … This is further reinforced by an amendment which makes a notification invalid if it is lodged on behalf of a small business by a trade union ...”

But in making collective bargaining applications the TWU made and other unions make application under section 88 of the ACL.

This section is a general “dispensation” provision in the act for use for other purposes; for example, seeking approval to amalgamate two businesses. The ACCC, however, routinely allows and approves union collective bargaining applications under this provision.

The ACCC says that 93AB (9) prohibits only “notifications”, not “authorisations”, therefore a union application is allowed. Go spot the difference!

Here, then, is the situation. It’s not illegal under competition laws for a company to pay a union for a service, namely to harass targeted competitors.

Further, the union and that same company can be authorised to control the company’s subcontractors. Who’s to say that the union and the company won’t collude to harm the subcontractors as they do the competitors? Certainly parliament appeared to have such concerns in passing 93AB (9).

It would be interesting to know the ACCC’s approach if two companies similarly colluded to harm a competitor.

The moral claim of the IR system is that it protects workers. The truth is that it protects union-favoured businesses, mostly large businesses from competitors and their own workers. Firms pay unions to achieve this.

The ACCC says there’s no “illegality”. But it looks corrupt.

[First published in The Australian, July 2015]

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