Companies hit with hefty fines

TWO Mackay companies have been fined after the Federal Court found them guilty of breaching the Trade Practices Act by engaging in "cover pricing" for government project tenders.

The Australian Competition and Consumer Commission said Woollam Constructions was fined $450,000 and Carmichael Builders was fined $250,000 for engaging in price controlling conduct known as cover pricing. A third company, JM Kelly (Project Builders) was fined $600,000.

ACCC chairman Rod Sims said the decision showed cover pricing - which involved discussions between two potential suppliers in a tender process - was illegal.

"The penalties imposed here should be a wake-up call for the construction industry that cover pricing is not a legitimate business strategy," he said.

Woollam Constructions director Craig Percival said the case was unprecedented.

"Never before had a case been run on the basis that a longstanding and widespread practice known as cover pricing was contrary to the law," Mr Percival said.

"It has always been our position that we did not intentionally breach the law... This was not a case where we 'fixed prices'. The judge found a light 'control of prices'. Woollam never changed or inflated its price notwithstanding a competitor had resolved to submit a cover price."

The ACCC said cover pricing was used when a construction company didn't have the time, resources or inclination to prepare an accurate tender, but still wanted to be seen as tendering for that project. It asked another company to provide a cover price, higher than its own, so it could submit a tender, it said.

"This gives the client the impression that both companies are tendering competitively," it said.

Woollam Constructions managing director George Bogiatzis was also fined $50,000 and the companies must pay the ACCC's legal costs.

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