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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.

The ACCC opens its eyes to Australia's dirty IR secret

Monday, August 17, 2015

The Australian Competition and Consumer Commission has issued a big warning to corporate executives involved in doing deals with unions. They are now under a ‘watch’ notice.

Executives doing normal industrial relations negotiations over enterprise agreements and the like should not have cause to worry. But where the deals move into shady areas that could arguably have the effect of harming competition it’s now time to become ultra-careful!

Last Friday night ACCC chairman Rod Sims gave a landmark speech to the Law Council of Australia.  He pretty much accepted that the ACCC has not paid enough attention to potential cartel behaviour conducted under the framework of industrial relations.

He said, “It is possible that in the past the ACCC has not sufficiently looked into such additional restrictive behaviour that … has the purpose or effect of substantially lessening competition thinking that such matters were covered by the carve outs …” The ‘carve outs’ Sims is referring to is the provisions in competition law that exclude employment matters for competition oversight.

The task of how to appropriately regulate a market economy is conceptually and legally complex. It’s a fine balancing act. At its core the job is to allow everyone the right and ability to compete and be in business. But the balance is to ensure that no-one achieves such market dominance or undertakes behaviour that blocks others from being competitive in business. This means the prevention of collusion seeking to achieve price fixing or control market share for example.

The setting of employee wages through industrial relations is, by its nature, price fixing. But this price fixing is taken as a social good and so specific provision in competition laws ‘carve out’ employment matters and processes.

What’s occurred over the decades of competition laws is the setting of a mindset that anything done with or by unions must be an ‘employment matter’ and untouchable by competition regulation. But this has been blown apart by evidence in the Royal Commission into union corruption.

The Royal Commission evidence is showing some unions and some union officials to be pretty nasty creatures screwing workers, businesses and the community for every dollar they can extract. But those stories are a comparative diversion. It’s just old-fashioned (normal) corruption.

What’s more significant is evidence of market manipulation and price collusion done on a broader scale under the pretense of ‘employment’. In other words, would-be market manipulators collude with unions to achieve control of markets. It’s not union corruption in isolation that’s the issue but the corruption of competition that’s the bigger item.   

The first evidence was mid last year, with the transport giant Toll admitting to paying the Transport Workers Union for the TWU to harass Toll's competitors. The ACCC investigated but said it couldn’t prosecute Toll because Toll didn’t have sufficient market share.

Robert Gottliebsen explained the anti-competitive conduct and why Toll escaped prosecution. Robert refers to Grace Collier and Judith Sloan as important commentators joining him in criticism of the ACCC over the issue. My organisation, Independent Contractors Australia, because of the collusion, attempted to legally challenge the ACCC authorising Toll and TWU to consequently collectively bargain. We were prevented from arguing our case because the court declared that we didn’t have ‘standing’.

At first it seemed that the ACCC couldn’t understand the outrage! But the evidence kept unfolding in the Royal Commission. The Australian Workers Union receiving secret payments after delivering business-favourable industrial deals to some employers smacks of market manipulation. This, and lots more, has generated an understanding the ACCC had not to date realised. The latest crunch has been evidence of alleged price fixing in the Canberra construction sector. That’s galvanised the ACCC.

Sims' speech could well signal a new era in Australian industrial relations. Fiddling with the Fair Work Act, as called for by the Business Council of Australia, for example, is relative small fry. The dirty secret of Australian industrial relations is the weird silence over select (mostly) big businesses, using cosy union relations to manipulate and corrupt competition; to give themselves competitive advantage. They pay unions for this.

The ACCC has opened its eyes, says Sims. No more will this be ignored. Importantly, Sims has detailed where the existing competition laws are defective in enabling prosecution. If there’s to be a big ‘industrial relations’ reform it’s fixing competition law constraints identified by Sims.

The objective is to protect consumers, small business people, employees and the community from employer-union collusion.

[First published in Business Spectator, August 2015]

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