John Durie: Construction union’s power games leave subcontractors by the wayside

The Federal Court has taken an important step in stopping the CFMMEU’s attempts to manipulate building markets by dictating who it will deal with, and in turn, raising prices.

Big companies love less competition because it gives you more pricing power. Big unions play exactly the same game, leaving many suppliers by the wayside trying to work out what they can do.

Case in point is Waterproofing Industries (WPI) director Ray Hadfield, who won a job nearly six years ago to do some work for national builder J Hutchinson on an apartment building in Brisbane.

WPI no doubt had the best pitch as far as Hutchinson was concerned but the construction union objected, saying WPI had no enterprise bargaining agreement (EBA) and therefore no right be playing the game.

The union wanted another subcontractor to do the work because it already had an EBA with the union.

The number one question is: who gets to decide who will be the subcontractor, the contracted builder or the union?

In this case the union won.

The competition watchdog took the matter to court, and while the case has concluded long after the work was completed, the coming fines might help set the record straight. 

WPI’s director Ray Hadfield told Hutchinson in June 2019: “Don’t worry, we will be paying all our workers EBA rates on the job. Any workers going on site will be financial members of the CFMMEU before they are inducted.”  

You might think that was the end of it, because after all, if the company was using union labour at union pay rates, what could be the problem?

The problem was WPI was not in the club — it didn’t have a CFMMEU EBA.

The CFMMEU is not best friends with the ACCC, and its Queensland boss Michael Ravbar told the court “spurious boycott behaviour typifies how unethical the commission has become”.

He added: “This is a sector with more corporate failures and sharp practices than any others.” 

It seems the union is presenting itself as the building industry’s advisor on ethics.

But the reality is simply an attempt at abuse of market power.

The union does better when there are a few players in the game because it can work with them to get high wages, which in turn means higher costs for users. And smaller companies that don’t play by the union rules are locked out. 

The mere fact the union felt it had a right to behave like this is of itself concerning and begs the question just how many times it has done so without attracting attention.

Big business does it too

Big companies play by the same rules, as evidenced in the telco sector on Monday when Telstra flexed its muscles. 

Telstra controls 50% of the mobile market and its former boss David Thodey was once quoted as saying he would prefer to deal in a market with fewer people involved.

Telstra has done an equipment swap with arch rival TPG, which of course merged with Vodafone in a $15 billion deal last year.

TPG will close its country mobile towers and use Telstra equipment while at the same time offering Telstra access to some of its spectrum in a deal that will boost Telstra revenues by $1.7 billion over the next 10 years.

TPC will close 175 regional towers from its network of 5500, but through the Telstra deal jumps up to 8600 towers. 

The clear loser in the deal is Optus, which now faces a more competitive TPG and worse still, in the long-term mobile phone tower with Vodafone.

The ACCC opposed the TPG mobile phone merger on the grounds it would reduce suppliers from four to three. The fear now is it may be down to two, with TPG in regional Australia effectively a virtual operator.

Telstra and TPG will reject this argument saying they compete in the big cities and that won’t change, which is true. But the ground has shifted.

TPG boss Inaki Berroeta, a Spaniard, has spent most of his time in Australia complaining about sweetheart government deals to Telstra but now he is joining the party.

The question is whether consumers will also win, and it must be said, that is problematical.

In the Hutchinson case, the Federal Court found the company and the union engaged in illegal boycott behaviour by reaching an agreement that effectively meant Hutchinson would stop working with WPI to avoid conflict with, or industrial action by, the CFMMEU at the site.

Federal Court Justice Kylie Downes said the evidence showed the motive for the arrangement was “to return to a situation where, as a general rule, subcontractors engaged by Hutchinson at the Southpoint project would have an EBA, being something the CFMMEU pressured Hutchinson to do and which Hutchinson did to avoid industrial action”.  

The court’s ruling is welcome to what was a lay down misère case of blatant union intervention in company business, which sadly met with little resistance from Hutchinson.