Competition law must include industrial relations

The Weekend Australian, September 10, 2016:

Rest assured, I am not just picking on building company J. Hutchinson, and its managers, Edan Hawley and John Berlese.

There are five other businesses being prosecuted over the same sort of thing. If they lose their cases, I intend to pick on them as well. Then those details will be on the public record. They, too, will be embarrassed in this column one Saturday. Then more complaints will be made and more prosecutions launched. On and on this cycle will go until we achieve permanent change in the managerial conduct of some of our largest companies.

Google is a wonderful thing. Executives who don’t want their careers ruined by adverse press are advised to refrain from law-breaking activity.

In recent weeks the Federal Circuit Court fined J. Hutchinson, plus Hawley and Berlese, for blatant discrimination of the “worst category”. They cancelled the engagement of a tiling subcontractor because the firm didn’t have an enterprise bargaining agreement with a union.

Judge Salvatore Vasta says the discriminatory conduct of the company and the two managers “strikes at the heart of freedom of association” and, if left unchecked, then “the whole fabric of our industrial relations system will disintegrate”. If only Vasta knew. In key sectors of our economy, the fabric of our industrial relations system disintegrated decades ago. In these industries, the conduct he finds concerning is not an aberration; rather, it is the norm.

It is the norm in the construction industry, mining, offshore oil and gas and even the communications sector. Generally speaking, in Australia, if a subcontractor wants to work on any of the “big jobs” they will be asked to sign a union enterprise bargaining agreement that will “uplift” the employment costs of their staff, often by about 20 per cent to 30 per cent.

These extra costs increase the price of their tender and are passed up the supply chain and on to the final bill that is paid by the client, who is usually, but not always, the taxpayer.

And if the subcontractor is not agreeable to all this, they simply won’t get the work. The only way to break into the larger projects is to make an EBA with a union and keep the union happy in any other ways the union demands.

For clarification, this is not a union-bashing column. Bashing unions is pointless; unions are doing only what unions will always do. The only way to real reform is to deprive corrupt unions of their corrupt client base: key sections of the corporate sector.

Indeed, even Vasta made the point the Hutchinson case was “not about the perceived evils” of the union, but was instead about how Hutchinson was “infringing upon the right of an organisation (the subcontractor) to elect with whom they will enter into a proper bargaining agreement”.

Further, the judge noted it was “extremely easy” for Hutchinson to pass on its own industrial relations risk to its subcontractors and “limit that risk by insisting the subcontractors conform to union demands or have a union-affiliated EBA”, and that this disadvantaged subcontractors “who simply want to earn an honest living”.

This week, we found out the Australian Building and Construction Commission bill will be the topic of a Senate inquiry. The ABCC could go after builders such as Hutchinson with renewed vigour, increased powers and larger fines.

The Senate Education and Employment Legislation Committee is seeking submissions on the ABCC bill by September 27 and it will report back by October 14.

The Prime Minister may be frustrated by this delay but if he doesn’t make use of it he could regret it. The government needs to use this delay to complete a simple, well overdue but very important and absolutely necessary task.

There have been two government inquiries in the employment relations space in the past few years. There has been a review by the Productivity Commission and a royal commission. Both of these inquiries have resulted in recommendations and both have prescribed making some key amendments to the Competition and Consumer Act 2010.

This is because anti-competitive conduct is excused and tolerated when it occurs in the industrial relations context, and to achieve IR reform we need to tweak the competition law and prosecute anti-competitive conduct even when it occurs in the industrial relations context.

Government types are well aware that drafting these amendments is a task they should have performed already. They have no excuse for not having done it. What they don’t understand is that getting the ABCC bill through the Senate could hinge on them doing this work, so they may as well get on with it right now and do it before they are made to, and publicly embarrassed in the process.