Unfinished Business: The Hold Cleaning Case - Part 4 - Conclusions

Part 4: Conclusions

Aftermath
After Justice Hill’s decision the ACCC issued what I think must be one of the longest news releases in the history of the ACCC or the TPC:

Court imposes penalties and costs of $210,000 for breach of secondary boycott provisions of Trade Practices Act on MUA[1]

In a precedent setting case, Justice Hill of the Federal Court of Australia has ordered that the Maritime Union of Australia pay penalties and costs totalling $210,000 for breach of the secondary boycott provisions of the Trade Practices Act 1974. He also made declarations that the union's conduct constituted undue harassment and coercion in breach of the Act. 

"As part of the orders, the court has imposed permanent injunctions restraining the MUA from engaging in undue harassment or coercion in connection with the supply of hold cleaning services to shipowners, charterers or their agents", ACCC Chairman, Professor Allan Fels, said today. "The court noted that the MUA had admitted to breaching section 45DB of the Act in relation to boycott conduct on two separate occasions and found the admissions to be properly made.

"In relation to the boycott conduct, the court imposed a penalty of $150,000 on the union. This is the first time a penalty has been imposed for a breach of section 45DB. 

"The behaviour involved especially serious coercion and undue harassment and it is appropriate that the Federal Court has held that this breaches section 60.

"This is particularly serious, intentional behaviour which has no place in Australian life".

After an extensive investigation, the ACCC commenced legal action on 14 April 2000 alleging that the MUA, and a number of senior officials breached section 45DB of the Act by unlawfully hindering and preventing, or attempting to hinder and prevent, vessels from sailing unless the ship owner/charterer agreed to use MUA labour to clean the vessel's holds. It was alleged that on a number of occasions, where such demands were not accepted, various forms of unlawful action to stop the vessel sailing followed (i.e. pickets, threats of pickets, action to delay, demands for payment in lieu of cleaning). The ACCC further alleged that certain aspects of the conduct amounted to undue harassment and coercion, in breach of section 60 of the Act.

In general terms, section 45DB prohibits persons from hindering or preventing the movement of goods between Australia and places outside Australia. Section 60 prohibits the use of physical force or undue harassment or coercion in connection with the supply or possible supply of goods or services to a consumer.

The ACCC believes that the means adopted by the MUA to ensure shippers use MUA labour to clean holds had the potential to affect, and had in fact affected, the ability of companies to conduct international trade and commerce. This resulted in a loss of international reputation and direct financial cost, leading to an overall reduction in consumer welfare.

Justice Hill made orders in which:

• it is noted that the MUA admits to contravening section 45DB of the Act on two separate occasions and that two of its senior officials admit to being knowingly concerned in these contraventions

• it is ordered that the MUA will pay a penalty of $150,000 in relation to the two section 45DB claims

• it is declared that the MUA contravened sections 45DB and 60 of the Act on two separate occasions, that two of its senior officials were knowingly concerned in the MUA’s section 45DB contraventions and that one of its senior officials was knowingly concerned in the MUA’s section 60 contraventions

• it is noted that the MUA and three of its senior officials have undertaken to the court not to engage or attempt to engage in similar conduct in the future in relation to section 45DB of the Act

• it is noted that the MUA has undertaken to implement a trade practices compliance program

• it is ordered that the MUA and one of its senior officials be permanently restrained from using undue harassment or coercion in connection with the supply of hold cleaning services to ship owners, charterers or their servants

• it is ordered that the MUA will pay the ACCC’s costs in relation to the contraventions of section 60 of the Act and will contribute $60,000 towards the ACCC’s costs in relation to the section 45DB claim

• it is ordered that the MUA publish a notice to its members and employees informing them of these orders and the ramifications of breaching them

The undertakings given to the court by the MUA and its senior officials will ensure that a company’s ability to conduct international trade and commerce, and the passage of ships containing goods bound for import or export, will not be adversely affected as a result of boycott action by MUA members. The undertakings will also ensure that shipowners will be able to enforce their right to choose who cleans their ship’s holds without interference by the union.

The ACCC took proceedings in relation to section 60 not only to ensure that conduct that may amount to undue harassment or coercion was not used to detract from a person’s ability to make effective independent business decisions, but also to obtain judicial clarification as to the realms of conduct which may amount to undue harassment or coercion".

The maximum pecuniary penalty available for a breach of section 45DB of the Act is $750,000 per contravention. No criminal fine was sought in relation to section 60.

This case follows orders by Justice French in the Federal Court, Perth in August 2000 that a debt collection agency, Cash Return Mercantile Pty Limited, and its former agent, Sharyn McCaskey, had engaged in undue harassment or coercion and is an important expansion of the realm of conduct to which section 60 of the Act applies. That case was the first of its kind under the Act. The MUA case, the second, is the first concerning a trade union and trade union officials"

Conclusions

The ACCC’s case against the MUA in relation to hold cleaning was a very successful case in a number of respects. Not only was the MUA ordered to pay a total pecuniary penalty of $150,000 for two breaches of section 45DB, but the ACCC also established that a number of MUA officials had been knowingly concerned in contraventions of both sections 45DB and 60.

It was also the first time that:

• a pecuniary penalty had been imposed for a contravention of section 45DB; and 

• section 60 had been used to attack the illegitimate use of picket lines by a trade union.

However, the most significant achievement of the hold cleaning case was that it actually succeeded in stamping out the practice of holding cleaning in Australia. By publicly exposing this outrageous practice through the courts and the media, the ACCC was able to force the MUA to formally abandon the conduct and take steps to make sure that such conduct never happened again.

The hold cleaning case was one of the most personally satisfying cases in which I have been involved. It was an excellent outcome for the ACCC and the industry. It was also a good outcome for the union movement. Unfortunately, when thuggish and extortionate practices are engaged in by even one union, such practices have a tendency to put the entire union movement in a very negative light. In this regard, the ACCC did the union movement a favor by taking action to stop the illegitimate and ugly practice of hold cleaning, once and for all.

The success of the hold cleaning case also made up, in a large way, for my personal disappointments about the MUA settlement following the Waterfront case. The MUA had been able to settle the Waterfront case on very favourable terms and with an enhanced reputation. However, these benefits were short-lived. The MUA came crashing back down to earth following the hold cleaning case, as the truth about some of its less savory practices became known. I was personally satisfied that the ACCC’s “unfinished business” with the MUA was now complete.

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[1] Court imposes penalties & costs of $210,000 for breach of secondary boycott provisions of Trade Practices Act on MUA, ACCC News Release at http://www.accc.gov.au/content/index.phtml/itemId/87905/fromItemId/378012

Unfinished Business: The Hold Cleaning Case - Part 3 - The Judgment

Part 3: The Judgment

ACCC v Maritime Union of Australia[1]

As stated in the earlier post, the ACCC had commenced legal proceedings against the MUA and a number of MUA officials, namely:

• Mr Derrick Newlyn, the South Australian Branch Secretary of the MUA;

• Mr Michael O’Leary, National Organiser of the MUA;

• Mr James Boyle, Branch Secretary of the Northern New South Wales Branch of the MUA

We had commenced legal proceedings against these three individuals because they were involved in a number of the incidents we had pleaded. However, they were also the MUA officials with regular and long running involvement in hold cleaning demands. Mr Newlyn was involved in hold cleaning demands in South Australia, while Mr Boyle was heavily involved in such conduct in Newcastle. Mr O’Leary was also involved in most hold cleaning demands as the person who spoke for MUA head office in support to the local hold cleaning demands.

The ACCC had alleged a number of contraventions of section 45DB of the TPA in relation to “Star Sea Bird and the “Anangel Eagle”. The ACCC also alleged that the MUA had engaged in contraventions of section 60 in relation to the “Star Sea Bird” and the “Jian Qiang”.

Prior to the trial, the MUA agreed to settle parts of the ACCC’s case. The MUA admitted that it had it had engaged in contraventions of section 45DB by engaging in conduct for the purpose, and having the effect, of substantially hindering the operators the Star Sea Bird and the Anangel Eagle vessels from engaging in trade or commerce involving the movement of goods between Australia and places outside Australia

Newlyn and Boyle also admitted that they had been knowingly concerned with the section 45DB contraventions involving the Star Sea Bird and Anangel Eagle respectively.

The MUA agreed to pay a penalty of $75,000 for each of the two s45DB contraventions - a total pecuniary penalty of $150,000.

The MUA however did not agree to settle the ACCC’s section 60 allegations. Therefore, this issue had to be decided by Justice Hill.


Justice Hill’s judgment

The following extracts from Hill J’s judgment provide a good description of MUA’s approach to hold cleaning demands:

Star Sea Bird

24 On 6 March 1999, some 45 minutes before the "Star Sea Bird" was due to leave the port, a picket line was formed at the main gate to the access road leading to the berth where the vessel was moored. The picket line was manned by persons who were members of the MUA including Mr McNeela and a Mr Ridgeway. The mooring gang rostered on that day to release the lines of the vessel arrived at the berth by launch. I would infer that they did so to avoid having to go through the picket line. The Division Manager of port operations, Captain Shipp, requested the mooring gang to release the lines to the vessel. The request was refused. A member of the mooring gang said that the vessel would be released if the agent gave a letter of undertaking to the union that shore labour would be engaged at the next port to clean the holds. No such undertaking was given. Captain Shipp again requested the gang members to release the lines. They again refused. A member of the gang (a Mr Crompton) said that there might be problems if the gang crossed the picket line. They could be in for a hiding and have their cars damaged. I should say that in allowing the words of the gang member to this effect to be given in evidence I did so not as evidence that gang members might in fact be in for a hiding or have their cars damaged, but rather as evidence of their state of mind, one of fear.

25 A meeting was then held between Mr Ridgeway and Mr McNeela…and representatives of the ship's charterer and of Ports Corp (SA), the port authority, to discuss a resolution of the dispute. While this meeting was taking place, Mr Crompton rang Mr Newlyn and was told that he should await "instructions" from Mr Ridgeway, who attended the meeting because he was to act in the position of Assistant Branch official of the South Australian Branch of the MUA from 8 March 1999.

26 Shortly after Mr Ridgeway asked Mr Travis whether it was his intention to engage shore-based labour and Mr Travis said that it was not, either in Adelaide or any other Australian port. Mr Ridgeway then said that the picket would remain in force.

27 A short time later arrangements were made with the port authority to have a mooring gang available the following morning to release the "Star Sea Bird". It departed Adelaide at approximately 7.30 am. As a result, Star Shipping incurred a loss of $17,610.62 made up of lost time, pilotage and tug cancellation fees and legal fees.

Jian Qiang

35 Approximately 35 minutes before the vessel was to depart a picket line formed at the main gate to the access road leading to the berth where the vessel was then moored. It was manned by members of the MUA, including Mr Newlyn. Members of the mooring gang employed by Ports Corp (SA) on that day to release the lines to the vessel were each members of the MUA. When requested to release the lines all but one refused. Two of the gang said that if they crossed the picket line they would be harassed. Another member said that if they did so they would have a problem. Again evidence of what was said by these gang members was admitted not as evidence of the fact that this would happen, but as evidence of their state of mind, ie as evidence of the fear they had of crossing the picket line. One gang member said that he would if instructed by his employer. For this he was called by Mr Newlyn "a dog, slime and a scab".

36 Later that evening Mr Travis contacted Mr O'Leary and told him that Western Bulk Carriers had put the vessel off-hire that evening. He referred to there being a dispute as to which charter party would be responsible for any hold cleaning. There was then a discussion as to what would be a reasonable cost to clean the vessel. Mr O'Leary suggested a contractor, Mathews Bros Pty Ltd, and later, when telephoned by Mr Travis again, advised that the cost would be $20,000. Later a representative of Lauritzen, Mr Kjaer-Petersen, had a conversation with Mr Travis. Mr Travis told Mr Petersen that it was no longer possible for the vessel to leave port and to have its holds cleaned at sea. He said that he had spoken to Mr O'Leary and that it was agreed that the cleaning could be carried out at a cost of $20,000, a figure substantially below the historical cost of hold cleaning in Adelaide. Mr Travis was then authorised by Mr Petersen to make the necessary arrangements with Mathews Bros for the cleaning of the holds by shore-based labour, notwithstanding that Mr Petersen expressed the view that he was not happy that Lauritzen was being forced to pay the cleaning costs. In the result, the vessel was re-delivered on 2 May 1998 with holds uncleaned to Lauritzen and then moved to Berth 27 where it was cleaned by shore-based labour prior to being loaded with barley.

Anangle Eagle.

42 A picket was then formed comprised of members of the MUA some 15 minutes before the vessel was due to leave the port. Soon afterwards, a representative of Adsteam approached one of the members of the picket line and asked him who he was representing or who sent him. He asked whether the picketer intended to prevent the ship from sailing and to advise the names of the picketers. The man replied that the questioner should speak to Mr Boyle for information.

43 The mooring gang (employed by Lovett McCracken & Bray) arrived some time later as the port programme was running late. The gang were also members of the MUA. Shortly thereafter the members of the mooring gang refused to release the lines because members of the MUA who were part of the picket line were seated on, or standing in, the vicinity of the bollards. The members of the mooring gang, the tugs and the pilots all left the wharf soon after.

44 Later that afternoon Adsteam arranged with Lovett McCracken & Bray to provide mooring personnel to release the lines so as to permit the departure of the vessel the following morning, that is, the morning of 9 August 1997. A picket line was again formed manned by members of the MUA. When the new mooring gang arrived they too were members of the MUA. They refused to release the lines because members of the MUA who were part of the picket line were seated on, or standing near, the bollards. The mooring gang, the tugs and pilots left the wharf around five minutes later. Mr Walker then spoke to one of the men who had been sitting on the bollard. The picketer asked at what time Adsteam was going to try again to sail the vessel. Mr Walker said that he was awaiting instructions from the ship's operator. He was told: "Whatever time, day or night, we'll be back."

45 Star Shipping instructed Adsteam to engage a firm to undertake minimal hold cleaning at a cost of $7,000. The vessel sailed for Burnie approximately three hours after the cleaning was completed. It is agreed that on each occasion the picket line was formed to incite and encourage, and did incite and encourage, the mooring gang to refuse to attend and release the lines unless hold cleaning using shore-based labour was undertaken. It was a result of this conduct that the vessel was delayed in leaving the port and that loss, damage and inconvenience was caused to Star Shipping and/or Aberfoyle. The loss incurred by Star Shipping was in the order of $22,000 comprised of the ship's time, cleaning costs, deferment of pilotage, site occupancy, overtime payments and legal advice.

As is apparent from these three descriptions, the MUA followed a similar pattern when making their hold cleaning demands. If the ship owner did not agree to using the MUA to do the hold cleaning, MUA employees would appear at the time the vessel was due to sail and prevent the vessel sailing by either threatening the linesmen, forming a picket line or obstructing the linesmen by sitting on the bollards. They would do this until the vessel missed its window for sailing from the port.

As a result, the ship-owner would not only have to book another time slot for the vessel to sail, but they would have to pay for all the services which had been booked for the departure, such as linesman, tug boats, pilot charges, which could not be provided due to the picket line or obstruction. The ship owners would also lose money because that the vessel had to be berthed for another 24 hours due to the delay, as well as charter party costs to the period of the delay.

The MUA would keep turning up every time the vessel was due to sail and prevent it from sailing until the ship owner finally capitulated.

Justice Hill’s first task was to determine the meaning of the words “harassment” and ‘coercion” in section 60. In this regard, he stated:

62 The word "harassment" in my view connotes conduct which can be less serious than conduct which amounts to coercion. The word "harassment" means in the present context persistent disturbance or torment. In the case of a person employed to recover money owing to others, as was the first Respondent in McCaskey, it can extend to cases where there are frequent unwelcome approaches requesting payment of a debt. However, such unwelcome approaches would not constitute undue harassment, at least where the demands made are legitimate and reasonably made. On the other hand where the frequency, nature or content of such communications is such that they are calculated to intimidate or demoralise, tire out or exhaust a debtor, rather than merely to convey the demand for recovery, the conduct will constitute undue harassment (see per French J in McCaskey at [48]). Generally it can be said that a person will be harassed by another when the former is troubled repeatedly by the latter. The reasonableness of the conduct will be relevant to whether what is harassment constitutes undue harassment…

63 "Coercion" on the other hand carries with it the connotation of force or compulsion or threats of force or compulsion negating choice or freedom to act.. A person may be coerced by another to do something or refrain from doing something, that is to say the former is constrained or restrained from doing something or made to do something by force or threat of force or other compulsion. Whether or not repetition is involved in the concept of harassment, and it usually will be, it is not in the concept of coercion.

In other words, harassment under section 60 is less threatening than coercion. However, harassment will involve a person repeatedly “troubling” or interfering with another person. If the demand is being made in relation to a legitimate matter, such as a valid debt, the conduct can still be “harassment” if the frequency of contact is unreasonable. On the other hand, if the demand is illegitimate the conduct will become undue harassment.

Coercion involves a greater degree of compulsion or force than harassment. The main distinction is that coercion does not require repetition of the conduct – ie: a one off act by a party may constitute coercion within the meaning of section 60.

Justice Hill concluded that the formation of a picket line, as had occurred in the present case, undoubtedly constituted “both coercion and undue coercion” within the meaning of section 60:

65. …The formation of a picket line to prevent access to a vessel for the purpose of allowing that vessel to depart, and in circumstances where the picket line is capable of engendering fear in the mind of those in the mooring gang employed to release the vessel for departure and thus prevent the departure from occurring, will constitute both coercion and undue coercion, at least where it is directed at compelling those responsible for the vessel the departure of which is affected to depart from their decision to have the holds cleaned at sea and instead to have the holds cleaned by shore-based labour.

This was a very significant finding as it indicated that section 60 could be used in relation to picket lines where the conduct of the parties on the picket line was aimed at coercing other individuals into engaging or refraining from engaging in particular conduct.

The only remaining issue to be determined by Hill J was whether section 60 applied to the MUA's conduct. This turned on whether section 6(2)(b)(1) could be used to extend the operation of section 60 to the MUA’s conduct in making the hold cleaning demands.

Counsel for the MUA, Julian Burnside QC, had argued that section 6(2)(b)(1) could only apply if these was a real and direct relationship between the conduct and international trade. Burnside QC argued that in the particular section 60 cases pleaded by the ACCC, the relationship was too remote.

Justice Hill rejected these submissions. He concluded that the relationship to international trade did not have to be direct for section 6(2)9b)(1) to apply. Accordingly, the fact that the vessels had been sailing to another Australia port before sailing overseas did not take them outside the scope of section 60, by virtue of the extended operation of the TPA.

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[1] ACCC v Maritime Union of Australia & Ors [2001] FCA 1549 – at http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCA/2001/1549.html?stem=0&synonyms=0&query=title(maritime%20union%20)

Unfinished Business: The Hold Cleaning Case - Part 2 - The Litigation

Part 2: The Litigation

Commencement of proceedings

We commenced legal proceedings against the MUA and three senior MUA officials on 17 April 2000: The MUA officers were:

• Mr Derrick Newlyn, the South Australian Branch Secretary of the MUA; 

• Mr James Boyle, Branch Secretary of the Northern New South Wales Branch of the MUA; and 

• Mr Michael O’Leary, National Organiser of the MUA.

It had taken us about 18 months to prepare and file the case, which was very quick given we had also been running the Sydney Mergers and Asset Sales Branch for most of that time.

In about March 2000, I moved from the Sydney Mergers and Asset Sales Branch to GST Operations after being asked to head up the ACCC’s GST enforcement. Even though I became the National GST Enforcement Coordinator in about April 2000, I kept working on the MUA hold cleaning case, which I considered as my pet project.

On the institution of legal proceedings, the ACCC issued the following news release:

ACCC institutes legal proceedings against MUA for hold cleaning demands[1] 

The Australian Competition and Consumer Commission has instituted legal proceedings against the Maritime Union of Australia and three senior MUA officials in relation to primary boycott conduct, ACCC Chairman, Professor Allan Fels, said today.

The ACCC has alleged the MUA, and a number of its officials and members, have been engaged in a pattern of conduct whereby they unlawfully hindered and prevented, or attempted to hinder and prevent, vessels from sailing from various Australian ports unless the ship owner agreed to use MUA labour to clean the hold of the vessel.

The practice of hold cleaning has a long history. Demands for hold cleaning work were considered by Justice Sweeney in the 1976 Final Report of the Royal Commission into Alleged Payments to Maritime Unions and again by Mr Frank Costigan in the 1984 Final Report of the Royal Commission into the Activities of the Federated Ship Painters and Dockers Union.

The ACCC concerns relate to the means by which hold cleaning work is demanded by the MUA.

The practice of making a hold cleaning demand involves a union official or officials and members demanding that hold cleaning work which may be required by a ship operator be performed by particular union labour. In the past, such demands were made by officials and members of the Painters and Dockers Union.

The ACCC alleges that in recent times officials and members of the MUA have made unlawful demands for hold cleaning work. The ACCC alleges that on a number of occasions when a demand was not acceded to it was followed by various forms of unlawful action to prevent the vessel from sailing. In some instances, it has been alleged that persons have unlawfully sat on the bollards where the vessel was tied to the wharf so as to prevent the linesmen from releasing the lines.

After an extensive investigation the ACCC formed the view that there had been a number of contraventions of 45DB(1) of the Trade Practice Act 1974. Accordingly, on 2 December 1999 the ACCC wrote to John Coombs, National Secretary of the MUA, to raise its concerns about hold cleaning in accordance with the clause 1 of the Alternative Dispute Resolution Procedure established by the ACCC and the MUA on 7 September 1998. (Mr Coombs is not one of the three senior officials of the union against whom proceedings have been instituted).

The ACCC proposed to the MUA, pursuant to clause 2 of the ADRP, that a meeting be held as soon as practicable to discuss the allegations in more detail and to explore practical steps to cease or otherwise remedy any breach of the Act by the MUA or to otherwise satisfy the ACCC that legal proceedings are not appropriate.

After some preliminary discussions, the MUA rejected the ACCC's settlement proposal. Accordingly, the ACCC believed it had no option but to institute legal proceedings under section 45DB and section 60 of the Act. In general terms, section 45DB prohibits persons from hindering or preventing the movement of goods between Australia and places outside Australia whilst section 60 prohibits the use of physical force or undue harassment or coercion in connection with the supply or possible supply of goods or services to a consumer.

The ACCC will be seeking injunctions, declarations, findings of fact, the implementation of a trade practices compliance program, penalties and costs.

A notable aspect of the ACCC’s news release was the reference to the ACCC’s attempts to resolve the matter by invoking the clause 1 of the Alternative Dispute Resolution Procedure which had been established by the ACCC and the MUA as part of the Waterfront Dispute settlement. We found these meetings with the MUA to be quite pointless in terms of having any constructive dialogue with them about the ACCC’s concerns. Unfortunately, the MUA’s attitude throughout the lead up to the commencement of litigation was that they were “bullet proof”.

No sooner had we instituted legal proceedings than the MUA launched a media campaign accusing the ACCC of being part of yet another grand conspiracy. The MUA claimed that the ACCC’s case had been commenced to coincide with the recent release of particular documents about the Waterfront Dispute to the Opposition transport spokesman.

While the claim was laughable, given the time it takes to prepare complex Part IV cases cases, the ACCC was so incensed by the allegations that it decided to issue the following news release in response:

Maritime Union of Australia case innuendo[2]

The Maritime Union of Australia has accused the Australian Competition and Consumer Commission of conducting a political exercise against the union in regard to the ACCC's legal proceedings against the MUA yesterday (Australian Financial Review, p3).

"There is no justification, no skerrick of a reason for this innuendo", ACCC Chairman, Professor Allan Fels, said today. "We are simply, as always, upholding the law of the land, a law passed by Parliament, without fear or favour. 

"There is a suggestion, for example, that the timing of this case is connected to the apparent release of documents to the Opposition transport spokesman regarding the 1998 dispute. 

"I, and so far as I know others at the ACCC, were not aware that the Opposition was obtaining these documents and, in any case, it would not have had any effect on the ACCC's decision to institute legal proceedings nor any effect on timing.

"The ACCC's timing was driven by the breakdown of talks with the MUA. In particular, the MUA wrote to the ACCC in a letter received on 6 April advising that it rejected the ACCC's proposals for settlement that had been under discussion since last year. The ACCC instituted proceedings as soon as legally practicable after this date, ie 17 April.

"The ACCC does not generally propose to engage in ongoing public exchanges with the MUA about the litigation. However, the MUA claims that its actions in extracting money from shipowners are really to protect the environment and that the ACCC is placing the environment at risk in a political exercise.

"The ACCC's role is to uphold the law. If there is unlawful action taken then the ACCC 's role is to take appropriate legal action. It regards the actions of the union as unlawful and negotiations to resolve the matter failed.

"Whilst the ACCC regards the union's boycott motives as economic, the ACCC notes the union's claims of environmental justification. It would have been open to the union to seek authorisation for its actions on environmental grounds and this was put to the union.

"Authorisation of unlawful or anti-competitive action is permitted under the Trade Practices Act 1974 if there is a benefit to public that outweighs any anti-competitive effect of the conduct.

"Moreover the MUA is not above the law. If it wants to play a law enforcement role by establishing and enforcing its own environmental protection safeguards by means which may be unlawful, it needs authorisation rather to take the law into its own hands.

"The ACCC understands that there are environmental laws and regulations that relate to the issues raised by the MUA. If these do not work well, as the union claims, the proper course is to get them improved. Alternatively, if private enforcement of the environment law by the MUA is the true and only aim of the boycott, authorisation should have been sought.

As is apparent from the above news release, the ACCC also took the opportunity to attack the MUA’s claims that their hold cleaning demands were somehow linked to a desire to protect the environment. Indeed, one senior MUA official said to me shortly after we had commenced legal proceedings that by the end of the trial he would have “greenies climbing over the roof of the courthouse” (which surprised me somewhat given the MUA’s long held concern about safety issues.).

The reality was that most of the MUA businesses which were engaged in hold cleaning were highly unprofessional in the way they carried out the work. They also had a much worse track-record than their non-MUA competitors in terms of discharging cleaning effluent from the holds into the harbour.

We had established an excellent legal team to run the litigation. We had briefed the Australian Government Solicitor as the lawyers on the case and retained David Yates SC, Peter Renehan and David Godwin as our counsel. This proved to be a very good team which the ACCC used again in its liquor cases against Liquorland Australia Limited and Woolworths Limited a few years later.[3]

While the case was ultimately transferred from me to the Sydney Enforcement Branch, I continued to work with a small enforcement team in a consultancy-type role.

This arrangement continued for some time until I had a run in with the Enforcement Director who had “notional” control of the case. I had been unhappy about a couple strategic decisions which he had made in relation to the case, which I believed were wrong and demonstrated his total lack of understanding of the case. I told him my views in no uncertain terms.

Unfortunately, this individual complained about my allegedly disrespectful conduct to the then Regional Director, who decided, in the best traditions of a “Dirty” Harry Callaghan B-Grade flick to “take me off the case due to my failure to respect authority”. However, in true “Dirty” Harry Callaghan tradition I kept working on the case for some time “behind the scenes” and “on my own time”.

Having said that, the two enforcement staff who had carriage of the hold cleaning case on a day-to-day basis were exceptionally capable and hard-working officers. They did a fantastic job in preparing the case and most importantly winning over the confidence of the various industry witnesses who the ACCC needed to give evidence if the ACCC was going to win the case.

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[1] ACCC institutes legal proceedings against MUA for hold cleaning demands, ACCC News Release, 17 April 2000 - http://www.accc.gov.au/content/index.phtml/itemId/323079/fromItemId/378010

[2] Maritime Union of Australia case innuendo, ACCC News Release, 18 April 2000 – at http://www.accc.gov.au/content/index.phtml/itemId/323077/fromItemId/378010

[3] Federal Court penalises Liquorland $4.75 million for anti-competitive liquor deals – at http://www.accc.gov.au/content/index.phtml/itemId/687035/fromItemId/620299 and Woolworths penalised $7 million for anticompetitive liquor deals at http://www.accc.gov.au/content/index.phtml/itemId/773813/fromItemId/720536

Unfinished Business: The Hold Cleaning Case - Part 1 - The Investigation

Part 1: The Investigation

Introduction

As stated in the final post of the Untold Story: The ACCC’s Role in the Waterfront Dispute,[1] some ACCC staff, primarily me, were quite unhappy with the settlement reached with the MUA in the Waterfront Dispute. We believed that the MUA had more or less gotten off scot-free, considering that it had engaged in a large number of blatant breaches of the TPA.

Accordingly, the first thing we did once the settlement with the MUA in relation to the Waterfront Dispute had been signed off, was pick up our pens and recommence work on our hold cleaning investigation.


Background

As stated in an earlier Untold Story post,[2] the practice of demanding payment for cleaning out the holds of vessels had been around for a very long time. The practice started in Sydney’s Balmain in 1900 with the establishment of the Balmain Labourers Union whose members were engaged primarily in painting, cleaning, docking and undocking of vessels.

The Painters and Dockers came to prominence in 1980 when it became the subject of the Royal Commission on the Activities of the Federated Ship Painters and Dockers Union, better known as the Costigan Royal Commission.

We were very surprised to discover that this illegal practice, which had been exposed by the Costigan Royal Commission in 1984, was still continuing unabated in a number of Australian ports in 1997. The practice of either forcing vessel owners to use MUA labour to carry out necessary or unnecessary hold cleaning work or demanding payment for hold cleaning work already carried out by another cleaning company was occurring quite regularly in the bulk cargo ports in Western Australia, South Australia, Newcastle and Port Kembla.


The Investigation

Once the Waterfront Dispute was over, my Waterfront team (which by that stage consisted of my Assistant Director and me) went back to our usual job of running the Sydney Mergers and Asset Sales Branch. However, we also dug out the hundreds of pages of section 155 documents we had obtained a year before from various market participants. We resumed our painstaking review of these documents in an attempt to identify potential contraventions of the TPA.

We were quite understaffed in Mergers, so finding the time to investigate and prepare the hold cleaning case against the MUA was very difficult. The only way we could conduct our mergers work and the hold cleaning investigation at the same time, was to work on mergers until about 6pm or 7pm and then to commence the hold cleaning investigation at about 7pm each night. We would continue to work on this investigation until 11 or 12pm.

The first task was to review hundreds of pages of section 155 documents, consisting primarily of telexes and facsimiles from shipping agents and ship owners. We would try to match up the documentary evidence provided by a ship owner with the documents generated by the shipping agent in relation to the same hold cleaning demand.

The second task was to re-engage with the industry. This involved contacting various potential witnesses and explaining to them that the ACCC had decided to reopen its hold cleaning investigation. Some industry participants were unwilling to help as they suspected that our case would only result in a slap on the wrist for the MUA. Other industry participants had a higher opinion of the ACCC after the Waterfront Dispute as they had been impressed by our determination in holding out for an outcome for small business victims of the dispute.

Obviously, winning over market participants is a very important part of running any case, as you will be relying on these market participants to be your witnesses in any future litigation.


Framing the contraventions

The focus of our investigation had been on instances of primary boycotts in breach of section 45DB of the TPA. As explained in the Untold Story, this provision stated:

(1) A person must not, in concert with another person, engage in conduct for the purpose, and having or likely to have the effect, of preventing or substantially hindering a third person (who is not an employer of the first person) from engaging in trade or commerce involving the movement of goods between Australia and places outside Australia.

Our argument was that the MUA had engaged in conduct which had prevented and substantially hindered ship owners from engaging in trade or commerce involving the movement of bulk goods between Australia and places outside Australia.

While this contravention was generally quite easy to prove, the main difficulty arose in relation to proving that two MUA officers or employees had acted in concert. Often the ship owner would simply capitulate once they had received a threat from a single local MUA official. Unfortunately, we could not pursue these types of allegations because:

• we could not prove that two MUA officials or employees had acted in concert and 

• we could not prove that the movement of goods had been hindered or prevented.

Therefore, we had to focus our case on incidents where:

• we could clearly identify at least two MUA officials or employees acting in concert; and

• we could show the vessel carrying the relevant goods had been prevented or significantly hindered from sailing by the conduct of the MUA officials or employees.

ACCC staff were also keen to explore whether other provisions of the TPA could be applied to the conduct. The main section of the TPA which ACCC staff we were keen to pursue was section 60 which provided (at that time):

A corporation shall not use physical force or undue harassment or coercion in connection with the supply or possible supply of goods or services to a consumer or the payment for goods and services by a consumer.

The reasons ACCC staff were keen to use section 60 was because:

• the section seemed to more accurately reflect the conduct which the MUA was engaging in, which was thuggish and threatening behaviour; and 

• section 45DB had only been in the TPA since 1996 so we were unable to use it in relation to hold cleaning demands which had occurred prior to that date. However, section 60 had been in the TPA for a long time so we were able to use the section in relation to demands which had occurred prior to 1996. 

However, there were a few obstacles to using section 60 in relation to hold cleaning conduct.

The first obstacle was that the supply had to be “to a consumer”. On first glance, this did not seem to be a proper characterisation of the “transaction” between the MUA and a ship owner. However, this ended up not being a problem where the value of the transaction was less than $40,000 as such transactions were deemed to be "consumer transactions" under section 4B of the TPA. This did mean that we had to abandon potential section 60 claims in relation to hold cleaning demands where the MUA had demanded or been paid more than $40,000.

The second obstacle was that under section 60 the entity contravening the provision had to be a corporation, which the MUA was not. Therefore, the only way we could use section 60 was to rely on the extended operation of the TPA as set out in section 6.

We sought to use section 6(2)(b)(i), which extended the operation of the TPA to conduct involving trade and commerce between Australia and places outside Australia.

We also believed we could use section 6(3), which extended the operation of section 60 to conduct involving the use of postal, telegraphic or telephonic services, as long as we could prove that an MUA official or employee had used a relevant "service" to make the hold cleaning demand. In other words, we could only pursue section 60 cases where the MUA officer or employee had engaged in some part of the conduct by sending a letter through the mail, making a telephone call or even sending a facsimile.

While it took a great deal of argument to convince the ACCC’s counsel that section 60 could and should be used, they ultimately agreed to include some section 60 claims in the case against the MUA.

ACCC staff had also wanted to explore the use of section 58 of the TPA in relation to the MUA’s hold cleaning conduct. Section 58 prohibits blowing or accepting payment for a good or service when the party accepting the payment does not intend to supply that good or service.

The reason that the ACCC was interested in this provision was because of instances of the MUA demanding payment from ship owners for hold cleaning where the service had already been provided by another cleaning company. In other words, there were instances of the MUA seeking to extract payment from a ship owner even though they had used another company rather than MUA labour to clean their holds.

ACCC staff believed that as it was impossible in these circumstances for the MUA to provide the service of hold cleaning for the vessel (as the holds had already been cleaned) the MUA were accepting payment in circumstances where they knew they could not carry out the hold cleaning work. While such conduct is more appropriately described as “extortion”, we believed that we could attack this conduct under section 58 because the MUA were accepting payment for hold cleaning services when it clearly had no intention of supplying hold cleaning services.

Despite the best efforts of the ACCC to convince counsel to include a section 58 claim in our case, we were not successful. In hindsight, this was probably a good decision, as such a claim may have been seen by the court as stretching the purpose of section 58 to absolute breaking -point.

---

[1] http://competitionandconsumerprotectionlaw.blogspot.com.au/2012/07/the-untold-story-acccs-role-in.html

[2] http://competitionandconsumerprotectionlaw.blogspot.com.au/2011/11/untold-story-acccs-role-in-waterfront_13.html

The Untold Story: The ACCC's Role in the Waterfront Dispute - Part 19 - Conclusion

Part 19 - Conclusion

Introduction

The history of the Waterfront Dispute has been described in considerable detail in the book Waterfront: The Battle that Changed Australia, as well as in the ABC Mini-Series Bastard Boys. While both of these “histories” are to be commended for what they attempted to cover, they both failed to provide a balanced account of events. Neither side of the dispute demonstrated any integrity in the way they behaved during the Waterfront Dispute.

It is quite apparent from the information which has become public since the end of the Waterfront Dispute that the Howard Government conspired with Patrick Stevedores to sack its MUA workforce. It is also clear that the MUA and the ACTU made a conscious decision to pursue their own narrow political agenda, rather than making any attempt to respect the rule of law.

The only party which demonstrated any integrity and showed any respect for the rule of law during the Waterfront Dispute was the ACCC.

The ACCC had to endure a great deal of criticism from Patrick Stevedores for not getting involved in the Waterfront Dispute earlier. The ACCC was also on the receiving end of a great deal of criticism from the MUA, ACTU and Labor Party for having deciding to get involved in the Waterfront Dispute at all.

Despite the constant criticism and considerable pressure placed on the ACCC, it successfully resisted this pressure. The ACCC intervened in the dispute in an appropriate way at the appropriate time.

The ACCC also resisted even greater pressure at the end of the dispute when all the parties were trying to force the ACCC to walk away from its case. The ACCC resisted this pressure and refused to settle its litigation until it had achieved some meaningful outcomes for small businesses.

Aftermath

The subtitle to the Waterfront book is The Battle that Changed Australia. This subtitle suggests that the Waterfront Dispute has had a long lasting and profound effect on Australia as a nation. The reality is that the Waterfront Dispute did little to change Australia or even the waterfront.

Many of the MUA workers who were sacked were subsequently offered generous redundancies. Since the Waterfront Dispute the MUA’s membership has continued to rise steadily so that it now has 14,000 members, which is more than it had in 1998. The MUA also continues to enjoy a labour monopoly on the Australian waterfront.

Patrick and P&O also benefited from the Waterfront Dispute as their MUA redundancies were paid for by the Australian public, through a container levy, rather than by the companies themselves. Patrick Stevedores (now Asciano) and P&O (now DP World) continue to enjoy a stevedoring duopoly on the Australian waterfront.

The Howard Government won the 1998 election and was able to avoid a Royal Commission into its role in the Waterfront Dispute.

The ACTU enjoyed a short-lived resurgence in popular support for unions which saw union membership increase in a number of industries.

The ACCC also came out of the Waterfront Dispute with an enhanced reputation as a capable and fiercely independent regulator. It was largely due to the ACCC’s performance during the Waterfront Dispute that the Howard Government gave it the key enforcement role during the GST transition period.


Biggest looser

The biggest looser during the Waterfront Dispute was without doubt the rule of law. Both sides of the dispute paid scant regard to the rule of law when it did not suit their ideological imperatives.

The freedom of association protections contained in the Workplace Relations Act were ignored by Patrick Stevedores and the Howard Government in their desire to oust the MUA from the waterfront. The Office of the Employment Advocate also turned a blind eye to clear breaches of freedom of association laws.

The MUA and ACTU chose to ignore the secondary boycott provisions of the TPA by engaging in, and encouraging, broad ranging and violent boycotts throughout Australia. Furthermore, the MUA and ACTU relentlessly attacked the ACCC when it sought to do its statutory duty and enforce the law.

Having said this, it was the rule of law which ultimately prevailed when the High Court ruled that Patrick Stevedores had to reinstate its sacked MUA workers. This was the key event (which was reached by the High Court in record time) which most contributed to the speedy and final resolution of the dispute.

As stated in an earlier post, the ACCC knew within 48 hours of the MUA workforce being sacked that Patrick’s conduct was likely to be found to be illegal by a court and further that the court was likely to order that the MUA workers be reinstated. If the ACCC knew this fact, there is little doubt that the MUA and ACTU also knew that this was going to be the likely outcome once legal proceedings had been commenced. However, the MUA was determined to do anything it could to prevent even one non-union worker from working as a stevedore in Australia, even though it knew that the court would ultimately rule in its favour.


Conclusion

The Waterfront Dispute was a significant event in Australia’s industrial relations history. It was also a significant event in the history and development of the ACCC as an independent and credible enforcement agency. Unfortunately, the ACCC’s role in the Waterfront Dispute has never been fully explored in any detail before now.

I hope that the account which I have provided on this blog has helped readers understand more about the ACCC’s role in the Waterfront Dispute as well as the reasons why the ACCC became involved.

In many respects, the ACCC’s role in the Waterfront Dispute represents the best example of the ACCC’s enforcement ethos– namely, to always enforce the TPA and the CCA without fear or favour.


Epilogue

While this post completes The Untold Story: The ACCC's Role in the Waterfront Dispute, the story does not end here.

As stated above, some ACCC staff, including myself, were quite unhappy with the settlement reached with the MUA in the Waterfront Dispute. We had a view that the MUA had more or less gotten off scot-free, considering that it had engaged in a large number of blatant breaches of the TPA. Accordingly, the first thing we did once the settlement with the MUA in relation to the Waterfront Dispute had been signed off, was pick up our pens and recommence work on our hold cleaning investigation.

Therefore, by way of an Epilogue, I will be writing one further post in this series (to be entitled Unfinished Business) in which I will provide an outline of the ACCC’s successful case against the MUA in relation to hold cleaning.

The Untold Story: The ACCC's Role in the Waterfront Dispute - Part 18 – The Settlement – Final

Part 18 – The Settlement – Final

Introduction

In this post, I will be discussing the terms of the ACCC’s settlement with the MUA and Patrick in more detail. Despite the significance of this settlement, it received very little attention in the media at the time or subsequently in various accounts about the Waterfront Dispute.

Trust Fund

As stated earlier, the first aspect of the settlement was that Patrick would pay up to $7.5 million into a trust fund to compensate small businesses that had suffered loss or damage due to the MUA’s illegal conduct during the Waterfront Dispute.

We decided to call the trust the Stevedoring Industry Reform Small Business Compensation Fund. In hindsight, this was a very long name, but we wanted to make it clear that the fund was part of the broader waterfront reforms, as well as being aimed at providing compensation to small businesses.

The ACCC did not want to be in direct control of a fund of up to $7.5 million. We did not have the skills or the systems to manage such a large amount of money. We also did not want to get involved in the time consuming process of assessing compensation claims and making distributions from the fund. Accordingly, we decided to structure the transaction in such a way that we could appoint the Official Receiver of New South Wales to be the trustee of the Fund.

We set up a trust which required Patrick Stevedores to pay all the money directly to the trustee. The trustee would then be required, under a trust deed, to assess various claims and make distributions.

We designed a detailed Claim for Compensation form for applicants.

The introduction to the Claim Form explained that the ACCC has established a discretionary trust to compensate parties who had suffered any loss of profit or consequential losses which were:

…directly attributable to the activities of the Maritime Union of Australia during the period 7 April 1998 and 2 September 1998 in preventing the introduction of non-union labour in stevedoring operations at ports of Australia.

Claimants had to lodge their applications for compensation by 31 March 1999.

Section 2 of the Claim Form defined who was eligible to receive compensation. We excluded particular categories of claimants for example, all federal, state and local governments, government business enterprises, and any companies associated with Patrick or the MUA. The last thing we wanted to see was the government, Patrick or the MUA making a claim for compensation on the Fund!

The Trust gave priority to individuals and businesses with an annual sales turnover of less than $100 million per year. Initially claims were to be limited to $200 000 per claimant.

We also made it clear in the Claim Form that parties would not be able to make a claim if they had insurance which covered their losses.

However, there was also provision for larger business to claim on the Trust Fund once all small businesses have recovered their damages. We did not want to give any money back to Patrick if we could possibly avoid it.

The main challenge we saw was to make sure Patrick actually paid the agreed money into the trust fund. The way we did this was to enter into a section 87B undertaking with Patrick which created an obligation that Patrick enter into a Deed with the ACCC.[1] It was the Deed which created the legal obligation that Patrick pay the money into a trust fund at the ACCC’s direction.

Clause 2 of the Deed stated that:

Patrick agrees to make the following payments (on the dates specified) into a trust to be established by the ACCC for the purpose of compensating persons for losses arising in connection with the events referred to in the statement of claim relating to the proceedings referred to recitals A and B…

Patrick was required to pay $1 million into the trust fund on the following dates:

• 1 September 1998;

• 31 December 1998;

•  21 March 1999;

• 30 June 1999; and

• 30 September 1999.

The final $2.5 million was payable within 30 days of lodgment of Patrick’s final year results in 2000 if certain conditions were met.

Once everything had been set up, it was my job to write to Patrick one month before each of the payments were due to remind them of their obligation to make the $1 million payment to the Official Receiver of New South Wales by the due date. We were concerned that Patrick may forget to make one of the payments by the due date!

Despite my very clear instructions to Patrick as to where to send the $1 million cheque, on almost every occasion Patrick would hand deliver the $1 million cheque to me personally.

It became apparent to me after the third occasion that the senior manager at Patrick responsible for making the payments had not in fact misunderstood my simple instructions. Rather, he formed the view that he could use the occasion of delivering the cheque as an opportunity of criticizing the ACCC for the way it had resolved its waterfront litigation – namely, by getting Patrick to pay the MUA’s damages.

After a while, it became a standing joke in the ACCC about how I would be receiving my $1 million cheque from Patrick every six months. On receiving the cheque, I would patiently listen to the abuse from the senior Patrick’s manager about the ACCC, give him a receipt and then say words to the effect of “See you in six months for the next $1 million installment.” I would then hand-deliver the $1 million cheque to the Officer Receiver of New South Wales for depositing into the Trust.

The Fund ended up paying out $5 million to 85 claimants:

$5 Million paid from Waterfront Trust Fund[2]

More than $5 million has been paid from the Stevedoring Industry Reform Small Business Compensation Fund, established by the Australian Competition and Consumer Commission, to 85 businesses affected by the waterfront dispute in 1998.

"The compensation has been paid to the businesses which suffered loss and damage as a result of the waterfront dispute", ACCC Chairman, Professor Allan Fels, said today.

"The ACCC intervened in the waterfront dispute and established the Compensation Fund to compensate businesses whose cargoes were held up by boycott conduct at a number of Australian and overseas ports.

"Eighty-five businesses have so far received compensation from the fund for the economic loss they incurred during the dispute. This includes numerous small businesses, as well as a number of exporters who had cargo on the Columbus Canada, which was stranded off the Los Angeles coast for a number of weeks during the dispute due to boycott activity in the US.

"Compensation of $5 million to these businesses is a very positive outcome because they would otherwise have suffered significant financial harm due to factors totally outside their control. Many of those affected were small businesses which would have been unable to take their own private legal action".

MUA Undertakings

The orders and undertakings which we ultimately agreed with the MUA were a significant compromise because the MUA did not want to agree to anything meaningful. It is fair to say that the MUA are probably the toughest “negotiators” that I have every dealt with – indeed, their idea of a negotiation is to just say “no”. In that context, getting any undertakings out of the MUA was a significant achievement.

The first part of the orders had a recital section where the court noted the role of the MUA in protecting and advancing the interests of its members as well as its self-appointed role in protecting international seafarers through their flags of convenience campaign.

I thought that the court may question this recital, given that it was totally irrelevant to the case at hand. However, the Court asked no questions at all.

The MUA also consented to a range of undertakings not to contravene the secondary boycott provisions of the TPA for a period of two years. In other words, the MUA provided an undertaking not to break the law!

However, the MUA also demanded a further carve out in relation to its flags of convenience campaign. This was quite an odd carve out given that the MUA’s conduct in relation to flags of convenience vessels was likely to constitute a clear breach of sections 45D and 45DB of the TPA.

Paragraph 2 of the undertakings created an obligation on the ACCC to notify the National Secretary of the MUA of any alleged breach of the TPA. The MUA then had to meet with the ACCC’s Chairperson within 48 hours to try to resolve the breach. In other words, the ACCC now had an obligation to formally advise the MUA that they were breaching the TPA and then to give them an opportunity to resolve the breach by calling a one-on-one meeting with the ACCC’s Chairperson.

Paragraph 3, provided that in the event that the meeting between the MUA’s National Secretary and the ACCC’s Chairperson was unsuccessful in resolving the ACCC’s concerns, then the ACCC and the MUA would jointly apply to the Federal Court within 72 hours to request the appointment of a mediator.

Under paragraph 4, the ACCC was prevented from taking any action in relation to a breach of the TPA until the steps set out in paragraphs two and three had been completed.

The orders also noted the establishment of the Stevedoring Industry Reform Small Business Compensation Fund. 

I was not very happy with the terms of the orders. In my view, the orders gave the MUA special treatment in relation to future contraventions of the secondary boycott provisions of the TPA.

I had no doubt that the MUA would have been bragging to its membership that the orders effectively gave the MUA much greater scope for engaging in illegal boycott activity in the future.

Reaction to settlement

The reaction to the ACCC and MUA settlement was generally very positive. Business groups seemed to be of the view that the ACCC had done the right thing in holding out for compensation for small businesses.

The ACTU was also very happy with the result, pointing out precisely what I feared about the effect of the orders – namely that the MUA now had much greater scope to engage in illegal boycott activity in the future. As stated by Greg Combet:

It (the ACCC settlement) hasn't required the MUA to pay one single cent. The undertakings given we believe are fair in the circumstances and are very confined in scope and indeed are an advancement on the position we have had previously, in that there is now a recognised disputes procedure before any action is taken by the ACCC.

We had always denied liability in this ACCC matter, there is copious amounts of evidence now on the public record that this dispute was an injustice done to the union and it was a conspiracy by Patrick and the Government.

The Federal Government also appeared to be quite relieved that the matter had finally been resolved. This was probably due to the fact that the matter was finalised one month before the Federal election which was to be held on 3 October 1998.

I suspect that the only group which was not happy about the settlement occurring at this time was the Federal Labor opposition. This was because they were getting a great deal of political mileage out of the dispute in the lead up to the federal election and wanted to keep the dispute on the front pages of the newspapers for as long as possible.

Royal Commission?

I recall receiving a telephone call just before the October 1998 Federal election from a senior public servant from another Federal Government department. This senior public servant had been working in one of the Federal Government departments which had been heavily involved in the waterfront strategy.

After exchanging some pleasantries, this public servant asked me whether I had “reviewed” the ACCC’s files in relation to the Waterfront Dispute. I responded by saying that I did not really understand what he meant by suggesting that I should “review” the ACCC’s files. He again suggested to me that it may be sensible for me to “review” the files anyway. I said that I still did not really understand what he meant but that I did not think that the ACCC needed to review its waterfront files.

At that stage, the senior public servant became very exasperated with me. He asked me, in a quite acerbic manner, whether I was aware of the fact that there was going to be a Federal Election and that if the Labor Party was elected in that upcoming Federal election then they may decide to establish a Royal Commission to look at the role of the former government in the Waterfront Dispute.

I thanked him for explaining these facts to me but advised him that the ACCC would not be “reviewing” its files, as it had no need to do so. I said to him that the ACCC had assessed all the information it had received during the Waterfront Dispute in the normal way and had done everything by the book. Therefore, I said that the ACCC had nothing to fear from any external inquiry, including from any potential Royal Commission.

The senior public servant appeared to be quite unhappy with my response given how he hung up on me by slamming his phone down with what seemed to be considerable force.

The Howard government was re-elected in 1998 and unfortunately there was never a Royal Commission into the role of all of the major players during the Waterfront Dispute.

The Untold Story: The ACCC's Role in the Waterfront Dispute - Part 17 – The Settlement – Continued

Part 17 – The Settlement – Continued
Introduction

As outlined in the Part 16 of The Untold Story, in July and August 1998 the ACCC was being heavily criticised by all of the players involved in the Waterfront Dispute for refusing to settle its case by simply walking away. Indeed, it was quite a remarkable achievement of the ACCC to have unified all the warring parties against it in this way.

Quandary

Amongst all the criticism, there was some support for the ACCC’s position from an unlikely quarter – namely, Terry McCrann.

McCrann was almost alone in expressing his understanding of, and support for, the ACCC's position. In an opinion piece in the Herald Sun on 5 August 1998, entitled “Fels and the law get in the way of the peace deal”,[1] McCrann insightfully described the dilemma facing the ACCC.

Trustbuster Allan Fels has become the embarrassing uninvited guest at the waterfront party that everyone is trying to pretend it really isn't there.

It's not because he spiked the punch, then immediately polished it off, and is now behaving like an all-round hoon.

In fact the exact opposite. It's like he's just - politely – reminded the partygoers that smoking pot is still illegal. And, well, the law must be enforced.

McCrann continued:

But we ended up with a classic IR ‘deal’ to settle the dispute, and the MUA agreed to abandon its conspiracy action against its two opponents.

The only problem was that Fels and his ACCC had initiated separate actions under the Trade Practices Act against the MUA for its actions during the dispute.

Not unreasonably – in IR terms – the MUA wants this action called off as part of the overall ‘deal’. If it abandons its legal action against Patrick/government, so should actions against it (be abandoned).

This would also be perfectly reasonable in ordinary legal terms, if the action was being taken by Patrick and/or the government. You scratch my back and I'll tickle yours.

Trouble is, the action is by a quite independent party, charged with enforcing the law. It can't – and most definitely should not – simply back off to facilitate the ‘deal’.

Fels spelt this out in crystal clear terms last night, when he said quite simply the ACCC could not just turn a blind eye to substantial, very public breaches of the law.

Further, to do so would open a Pandora's Box. It would set the precedent to every other transgressor to plead a similar argument.

It would only destroy the credibility of the ACCC and Fels himself…

Imagine if the police turned a blind eye to crimes when they could be persuaded it ‘suited’ various parties.

Fels is seeking two things. That the MUA offer a settlement for the damage caused innocent third parties during the dispute as a result of its allegedly illegal behaviour.

And that it promise not to engage in those allegedly illegal acts again.

The second might be easy, except that in IR terms it would amount to the MUA unilaterally disarming itself for future fights. On pain of very heavy penalties.

While the first is much harder, because Fels is talking big dollars. A figure of $10 million has been tossed around.

Such a settlement would have to come from the MUA, and it is unlikely to pay that sort of money willingly, as it feels its members were hard done by the dispute.

And after all, it’s given up its options for suing the government/Patrick.

In practice, some or all of the money should come from Patrick, as part of the price of settling the dispute.

McCrann concluded with the following:

In short, there is no easy way to get Fels off the MUA’s back. And it hasn't helped that the MUA has tried to pretend that the ACCC wasn't there.

On the one hand, the MUA told the ACCC in mid-June that it would come back with a settlement proposal. It never has.

And on the other, MUA secretary John Coombs just blusters in public, saying that Fels should join the deal and abandon the litigation like everyone else.

It's a completely false argument. Fels has to enforce the law. He can agree a settlement, but he just can't ignore the damage the MUA did.

The most interesting aspect of McCrann's article was a suggestion that Patrick should contribute to compensating parties for the financial damages caused by the MUA. At that time, I thought that his suggestion that Patrick pay the MUA’s damages bill was pretty outlandish. However, that is exactly what ended up happening.

MUA digs in

McCrann's references to John Coombs, blustering in the media was a reference to the following types of statements which he was making at that time:[2]

I'll tell you something now: if Fels doesn't drop off, the whole peace deal is over. Why would I withdraw my rights to take [the Minister for Workplace Relations] Mr Peter Reith and Patrick to trial to face conspiracy allegations and leave myself exposed to Fels handful of exporters or importers with its $10 to $20 million worth of damages? Jesus Christ… I have lost my senses and I'm not about to.

Greg Combet was also adamant that the MUA would not pay any damages:

It’s in the public interest that the ACCC should drop off and they have an obligation under their Act to have regard to the public interest.[3]

Combet described the ACCC’s demands that the MUA would have to pay damages for their illegal conduct as “just fantasy”.

Coombs continued his assault on the ACCC with the following letter to the editor which I will quote at length:[4]

Your [AFR’s] leader writer describes the waterfront dispute as a punch-up between “two drunks”, the MUA and Patrick, in the front bar (“Fels stands up to Coombs”, AFR editorial, August 5). Everyone else, you claimed, was an innocent bystander. 

Well, there were more than two in the ring a bit punch drunk during the great docks fight. The fight broke all the rules of fair play, with “promoter” Reith forever claiming the MUA was down when we were still well and truly on our feet.

Ten out of the 11 judges agreed the union had a case and that evidence suggested Patrick and others had conspired to have the workforce illegally sacked for being members of the union. The referee, in this case the High Court, ended the contest with the MUA winning on points.

Isn't it, then, a bit below the belt for your leader writer to now egg on the pugnacious Professor Fels, challenging the union to pay out $10 million in damages when we have not been found guilty of anything?

Now the brawl is over, the ACCC wants to pick a fight with the union, while turning a blind eye to those really responsible for any bruising that business suffered.

The hypocrisy of the ACCC tenaciously pursuing the union, while ignoring other complaints, is well documented. Not so long ago the ACCC failed to take on foreign shipowners over alleged price-fixing collusion.

The ACCC declined to assist importers in 1995 – 1996, despite requests from the Australian importers and despite legal advice that the price increases on freight could have been in breach of the Trade Practices Act.

The price hikes are estimated to have cost the Australian community between $45 million and $90 million over the past three years – costs which have been passed onto Australian consumers in the prices of the imported goods they buy and which far exceed the $10 million in damages allegedly caused by the waterfront dispute.

Well, if Professor Fels wants to take on the MUA, so be it. But if he continues with the ACCC legal action the matter could well end up back in the courts as early as next week. The implementation of the Deed of Settlement depends on the condition precedent that ACCC litigation “be discontinued, settled or dealt with to the reasonable satisfaction of the MUA”. It is worth noting that Mr Reith, if not Professor Fels, is a signatory to the deed.

These comments from Coombs provoked a swift response from Professor Fels who immediately issued the following news release:

ACCC not 'soft' on applying Trade Practices Act[5]

The Maritime Union of Australia is claiming that the ACCC is soft in applying the Trade Practices Act 1974 to business, Australian Competition and Consumer Commission Chairman, Professor Allan Fels, said today.

In fact the ACCC is widely acknowledged to have been extremely vigorous in applying the Trade Practices Act to break up price-fixing and other cartel agreements; the abuse of market power by monopolists; anticompetitive mergers; misleading and deceptive conduct; and unconscionable conduct affecting small business and consumers. It has applied the law without fear or favour to the biggest and most powerful corporations and interests in the land.

The MUA has cited a particular 1995/96 decision not to pursue a price increase by some importers. The key point is that there is a major exemption to prices by shippers written into Part X of the Act. This has been strongly supported by the MUA. The ACCC has strongly opposed this exemption for many years and has tried to get it lifted.

It was essentially because of the Part X exemption that the 1995/96 price rise was not pursued to litigation. Every enforcement agency, no matter whether vigorous or lax, has marginal cases. The 1995/96 price rise was marginal to negative in the ACCC's assessment. A very selective quotation has been taken from an ACCC letter to the industry at the time - even that letter makes it clear that the matter was at most marginal.

What is not said is that as a result of the ACCC's preliminary investigations the price increase was withdrawn (although later some of the increases may have found their way into unambiguously exempt freight charges).

More generally the ACCC has been vigorous in applying the law to the waterfront. It vigorously opposed with success the attempt by P&O to take over the bulk of Port Adelaide some years ago. As a result a new entrant, Sealand, entered the Australian market. It recently opposed Adsteam tugboat mergers in Sydney in court (even though it effectively lost that case). This is not to say that there are not limitations on the effectiveness of the Act in relation to the waterfront. The Act can foster competition, it cannot force it in certain industry structures.

The MUA's claims cannot be taken seriously. They are simply a crude attempt to discredit an independent regulator doing its job properly and to divert attention from issues affecting parties to the recent dispute on the waterfront.

On that same day, the ACCC issued a second news release following comments attributed to Patrick about its future pricing strategies:[6]

ACCC asks Patrick to explain pricing comments

The Australian Competition and Consumer Commission has asked Patrick Stevedore to explain its pricing policies after the resolution of the waterfront dispute. The request follows claims made in the Australian Financial Review where it is reported:

'While Patrick has said publicly it is reviewing pricing, it is understood the company - while promising improved efficiencies and reliability - will resist prices reductions'.

Public statements by Patrick that it is not intending to pass on cost savings in the form of reduced prices, prior to the conclusion of contract negotiations, may be construed as a sign of a lack of competition, ACCC Chairman, Professor Allan Fels, said today.

It is also difficult in most industries to predict what a firm's own prices will be without knowing what other firms in the industry will charge. The ACCC has asked Patrick about this aspect, that is, is their prediction based on a knowledge of the price of their competition?

The ACCC has sought information about whether any comments have been made by Patrick management or employees, since the agreement with the Maritime Union of Australia was announced on 25 June, that it is not intending to pass on any cost savings in the form of reduced prices for stevedoring.

Further, the ACCC has asked Patrick if it is its present intention to pass on savings achieved as a result of the agreement with the MUA.

The ACCC was concerned that Patrick may be engaging in price signaling – effectively, seeking to signal its future pricing intentions to its major stevedoring competitor, P&O Ports. There is little doubt that P&O was concerned that Patrick may use its lower cost structures to drop stevedoring prices in order to win business. However, P&O responded to this threat by seeking a similar outcome to Patrick. It entered into negotiations with the government and the MUA to reduce its MUA workforce. It was also able to avoid having to pay its redundancy liabilities out of its own resources because it was able to access the special stevedoring levy introduced by the government to fund MUA redundancies.

Settlement

While the recriminations kept flying between Professor Fels and John Coombs in the media, there had actually been some significant progress behind the scenes in terms of settling the ACCC’s litigation. The break came when Chris Corrigan agreed to make a contribution towards compensating the small businesses which had been damaged by the MUA’s conduct.

I must admit that, to this day, I do not know who had the idea to get Patrick to pay the compensation on behalf of the MUA. While the idea had been first raised by Terry McCrann in his article quoted above, I do not know who internally at the ACCC came up with the idea.

However, I understood why Patrick had agreed to paying compensation. Patrick was quite desperate to settle the dispute so they could get back to work with their new streamlined MUA workforce. It was apparent to us that with the loss of a few hundred MUA workers and the fact that these redundancies were to be paid for, not by Patrick, but through an industry levy, that Patrick would become a very profitable company very quickly.

Despite not knowing where the idea came from, I saw the logic of this approach to the settlement. It was clear in my mind that Patrick’s actions had triggered the entire dispute and as such they could and should be held to account for the damages.

On 1 September 1998, with most of the details of settlement worked out, the ACCC was confident enough to issue a news release announcing the details of the settlement:

Waterfront dispute case settled[7]

A settlement has been reached in relation to the Australian Competition and Consumer Commission litigation concerning the waterfront.
The settlement has been endorsed today by the Federal Court of Australia.

The settlement provides that a damages fund of up to $7.5 million, funded by Patrick Stevedore Holdings Pty Ltd, will be available for small businesses damaged by the boycotts during the dispute.

Also, the Maritime Union of Australia has provided a formal undertaking to the Federal Court not to repeat boycotts alleged to be unlawful by the ACCC during the dispute.

The damages fund will be administered by a trustee and payments will be subject to proof of losses arising from the waterfront dispute.

Small businesses which do not have an alternative claim for compensation, such as insurance, will be given priority over other claimants on the fund. A limit will be set on individual claims. 

The undertaking is for two years.

There is an associated dispute settlement procedure.

The undertaking does not apply to normal industrial relations actions protected under the TPA or Workplace Relations Act 1996. It also does not apply to lawful conduct to ensure compliance with relevant occupational health and safety legislation nor for the protection of international seafarers through the MUA's flags of convenience campaign.

The ACCC is satisfied with the outcome, ACCC Chairman, Professor Allan Fels, said today. Its objectives were:

•  compensation to small business damaged by the dispute; and

• an appropriate undertaking to the Court by the MUA, as is usual in TPA cases, not to repeat similar behaviour.

These objects have been met and the ACCC has agreed to settle the case.

We also decided to add the following comments in a “Background” section to the news release to fully explain the ACCC’s position in pressing for this settlement:

Background

In 1996 Federal Parliament greatly strengthened the secondary boycott provisions of the Trade Practices Act 1974.

The ACCC is responsible for seeking compliance with the Act. The ACCC did not take sides in the waterfront dispute but it was concerned to ensure that there were no breaches of the law during that dispute.

The ACCC believes that there were substantial, very public breaches of the boycott provisions of the Act which damaged small business and exporters. It issued several warnings to the MUA which were ignored. It had no option then but to take court action. It did not seek penalties. Its actions were directed to obtaining compensation for small businesses damaged by unlawful boycott behaviour and securing of appropriate court orders or undertakings to the Court by the MUA not to repeat similar unlawful behaviour in the future (a standard Trade Practices Act resolution).

The parties to the dispute approached the ACCC in mid-June about a settlement. The ACCC made it clear that it was prepared to settle and advised the parties of the parameters of a possible settlement. These included a compensation fund and a consent court order or an undertaking to the Court which had a similar effect.

Regarding the funding of the compensation payment the ACCC indicated at all times that it had no views as to who paid as it was not involved in taking sides in the rights and wrongs of the waterfront dispute. Its concern was merely the protection of the legitimate interests of small businesses damaged by unlawful actions that occurred during the dispute. There was no effective response by the parties to these proposals until last week. Claims by the MUA that the ACCC was delaying completion of the total agreement on the waterfront were without foundation. Claims that the total resolution of the waterfront dispute would 'come undone' unless the ACCC withdrew its case always lacked foundation and were merely an attempt to avoid compliance with the ACCC's reasonable proposals for settlement.

The ACCC is continuing to investigate a number of matters on the product market side of the waterfront.

The ACCC has perceived it as important to the integrity of the Act that it should have sought to uphold the law during the dispute.

As stated above, the settlement consisted of two parts.

First, there was an agreement by Patrick to pay up to $7.5 million into a trust fund to compensate small businesses who had suffered loss or damage as a result of the Waterfront Dispute. The reason the amount was expressed as “up to $7.5 million” was because the amount which Patrick ultimately had to contribute to the fund depended on particular conditions being met. As it turned out these conditions were not met, so Patrick only ever had to contribute a total amount of $5 million to the fund.

Second, the MUA consented to a range of injunctions in relation to their future conduct and an alternative dispute resolution procedure.

I will discuss the elements of the settlement in more detail in the next post.

Hiccup

Unfortunately, we did experience one strange hiccup in the last stages of the settlement which caused us considerable anxiety.

As stated in the ACCC’s news release a settlement had been “endorsed by the Federal Court” on 1 September 1998. This statement was true when we made it.

Once we had reached a settlement with the MUA and Patrick and agreed the proposed orders and undertakings with the MUA, we approached Justice North to have the orders made. Unfortunately, Justice North was unavailable to make the orders on 1 September 1998.

Accordingly, in the interests of settling the case sooner rather than later, we decided to approach Justice Beaumont (who was after all the judge hearing the larger and more significant of the two ACCC cases), to make the orders. Justice Beaumont made the orders in chambers and the ACCC issued its news release announcing the settlement later than day.

However, after we had obtained the orders and issued the media release, we received advice from the Federal Court that Justice Beaumont had withdrawn his orders and that the orders would now be made by Justice North on 3 September 1998. While we never knew the precise reasons for this strange development, I have my own personal theory about what happened.

Justice North decided to hold a hearing to make the orders. After some fanfare Justice North, made the requested orders finally settling the dispute on 3 September 1998.

Justice North obviously liked some aspects of the settlement as he went so far as to congratulate the parties:

I congratulate the parties upon resolution of a most difficult dispute in a way which appears to be creative and innovative.

Justice North’s orders were followed shortly thereafter by Justice Beaumont remaking his earlier orders.

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[1] Terry McCrann, Fels and the law get in the way of a peace deal, Herald Sun, 5 August 1998, pp. 29, 31.

[2]  Peace deal docks but stays on hold, Financial Review, 5 August 1998, p. 5.

[3] Dispute casts pall over docks deal, Financial Review, 6 August 1998, p. 5.

[4] Docks jibe takes wrong tack, Financial Review, 7 August 1998, p. 36.

[5] ACCC not 'soft' on applying Trade Practices Act, ACCC news release, dated 7 August 1998 - http://www.accc.gov.au/content/index.phtml/itemId/87249/fromItemId/378006

[6] ACCC asks Patrick to explain pricing comments,  ACCC news release, 7 August 1998 - http://www.accc.gov.au/content/index.phtml/itemId/87251/fromItemId/378006

[7] Waterfront case settled, ACCC news release, dated 1 September 1998 - http://www.accc.gov.au/content/index.phtml/itemId/87233/fromItemId/378006