Watchdog’s Court Loss Throws Spotlight on Union Balancing Act

A highly anticipated legal test case involving top-tier builder Hutchinson Builders and the CFMEU that put union relations in the spotlight has finally reached its conclusion. The case, which has been ongoing since 2020, was largely a result of the watchdog, the ACCC, attempting to define the parameters of what constitutes an “anti-competitive arrangement or understanding”. But the case proved to be less cut-and-dried than the ACCC anticipated. For the development industry, it has highlighted the precarious position of subcontractors and the continuing difficulties in balancing union relationships on job sites. The ACCC case The ACCC had alleged that Hutchinson Builders and the CFMEU engaged in anti-competitive practices by boycotting a waterproofing subcontractor on a Brisbane construction site in 2016. The project was the prominent Southpoint apartment and hotel development at South Bank. Law firm Gadens acted for Hutchinson Builders for the case before the High Court. Gadens special counsel Mitchell Byram told The Urban Developer that the issue came down to the court’s interpretation of what constituted an arrangement or understanding. ▲ Gadens special counsel Mitchell Byram. “Hutchinson and the CFMEU had an Enterprise Bargaining Agreement (EBA) which provided that Hutchinson would, on certain occasions, consult with the union about engaging subcontractors who paid their people and gave them certain entitlements equivalent to what Hutchinson would be giving under their EBA,” Byram says. “The subcontractor, WPI, was not giving its workers certain entitlements. “The union expressed that it wasn’t happy with that and threatened to engage in industrial action.” The ACCC alleged, in proceedings it initiated in 2020, that the subsequent termination of the subcontractor later was a result of an arrangement or understanding with the CFMEU, the terms of which would contravene sections of the Competition and Consumer Act. The Federal Court in 2022 initially found that “by making and acting on the agreement” Hutchinson had contravened those sections of the Act that prohibit understandings where one party is obligated to buy goods or services from another. ▲ The $600-million Southpoint project at South Bank, developed by the Anthony John Group, was completed in 2018. It also prevents parties entering into an agreement that could restrict the ability to acquire goods or services. The court ordered the CFMEU and Hutchinson to pay penalties of $750,000 and $600,000 respectively. However, the court also found that the CFMEU “induced Hutchinson’s contraventions … by threatening or implying that there would be conflict with, or industrial action by, the CFMEU” if Hutchinson did not stop using the subcontractor. This proved to be the sticking point as the case moved along. An appeal by Hutchinson to the full Federal Court was upheld last year. While the ACCC attempted to appeal this decision and received special leave to do so, a majority of the High Court last month dismissed the watchdog’s appeal, clearing Hutchinson of anti-competitive practices. ▲ The Southpoint project included the 146-key Emporium hotel. “We took this case originally because boycotts are a kind of anti-competitive conduct which harms the economy as well as individual businesses and consumers,” ACCC chair Gina Cass-Gottlieb said in a statement. “The issue of what is needed to prove an arrangement or understanding is an important one for the enforcement of our competition laws.” But, she said, the High Court ruling “reflects the complexity of enforcing these provisions of our competition laws”. It also reflects the pressure on builders and developers in managing union relationships as the CFMEU continues its slow-motion implosion after allegations of intimidation tactics of the union came to light last year. What it means for the industry The issue put the ACCC on the backfoot, and it might not have been the right case to take this far given the currently fraught nature of union and contractor relationships, according to University of Sydney competition law expert Rob Nicholls. “It appears to be the wrong case to have tried because it concerns the interpretation of what a contract arrangement or understanding is, and the extent to which there needs to be a “meeting of the minds” rather than a threat,” Nicholls said. ▲ University of Sydney competition law expert Rob Nicholls. While the case has been picked over by the legal sector for its interpretation of the Competition and Consumer Act, it has also put in the spotlight the balancing act that faces developers and builders in handling union disputes, and pay and employment conditions. “From a building industry perspective, the outcome of this case sounds pretty horrible given that it was obvious what’s going on, Hutchinson were responding to a threat, it was acting in self-preservation, and that’s different,” Nicholls says. “But the High Court did not find a boycott was going on because of the threats of the CFMEU [and these] did not constitute ‘a meeting of the minds ’ . “And what do you do if you’re a developer to avoid this? It’s quite hard to understand how you can effectively manage subcontractors in a situation like that. ▲ The CFMEU accounts for less than 10 per cent of industry participants, according to Master Builders. “One answer is to only use subcontractors that are part of a CFMEU enterprise agreement, and that is absolutely not what the ACCC would have wanted.” It also raises issues about what an “arrangement or understanding” means with regards to union pressures on the building sector. “The issue was whether, for there to be an arrangement or understanding, there needs to be some sort of communication. Does there need to be express or tacit communication of assent to that arrangement or understanding?” Byram says. “Because in this case, there was no direct evidence of communication of assent—the CFMEU told Hutchinson it was unhappy, but after that there was no communication from Hutchinson of its assent to a particular course of conduct.” ▲ Hutchies was Australia’s fourth-largest builder last year with a total project value of $1.7 billion, according to the BCI Construction League. The case will have “significant implications” on competition cases, and a knock-on effect in certain industries, particularly those that are heavily unionised. “The ACCC seems to have pursued its High Court appeal not because of issues with Hutchinson or the CFMEU, but because the words ‘arrangement’ and ‘understanding’ are so important to the Competition and Consumer Act and it was important that their meaning be clarified,” Byram says. “But the relevant section [of the Competition and Consumer Act] was introduced to address scenarios where unions put pressure on organisations to act in a certain way.” This may mean we will see legislation in future to properly encompass those activities. “And given that the building industry is one of the most heavily unionised, it may have implications for the building industry and other unionised industries, and regulation of union conduct.”

Watchdog’s Court Loss Throws Spotlight on Union Balancing Act

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