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Queensland: Boral, Pioneer and CSR found guilty of price fixing and fined $21 million -

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KERRY O'BRIEN: Corporate history was made in the Federal Court today, when three high-profile Australian companies were fined $21 million; the biggest fines of their kind in this country.

Boral, Pioneer Concrete and Readymix were all found guilty of running a price-fixing racket in Queensland's cement industry, affecting building contracts worth nearly one billion dollars over five years. It's a major victory for the Trade Practices Commission - which is now called the Australian Competition and Consumers Commission - in its fight to clean up Australia's corporate marketplace.

Queensland correspondent, David Margan, reveals how blatantly the cartel operated and how everyone just accepted that that was the way business was done.

DAVID MARGAN: For five years the business of concrete in Queensland was rigged. There was to be little competition and certainly no price wars.

JUSTIN MALBON: Well, in this particular case it was a very blatant exercise where the parties knew damn well that they were breaking the law.

I think that shows that we have got to look at anti-competitive behaviour, fraudulent behaviour, right across the board. We have got to go for the big guns.

DAVID MARGAN: In Queensland, six companies control the concrete business. They are: Boral, Pioneer, CSR Readymix, Hymix, Exsell and Rockla. They are known in the trade as 'the concrete Mafia'. But the big guns were Boral, Pioneer and CSR: they ran the show; they controlled 79 per cent of the market; they were the cartel's heart, especially in south-east Queensland.

From mid-1989 the companies held regular meetings at a number of venues scattered across Brisbane. It was decided that they wouldn't compete against each other for the business of anyone who was a regular customer of one of the participants. These clients were referred to as 'pets'.

JUSTIN MALBON: The effect of it was to rip them off. So basically that 'pet' customer, if they attempted to get a better price from anyone else, if they attempted to get a better price they would find that in fact it just wouldn't occur.

DAVID MARGAN: This meant that they would either not tender for a 'pet' contract or do so at a higher price, forcing the 'pet' customer, with or without their explicit knowledge, into the arms of one supplier at a price the cartel had preordained.

But why would they do this? Why would such companies seek to preserve the status quo of their market share and avoid the cut and thrust of competition?

UNIDENTIFIED: That's right. I think they had figured that it was better to act illegally, take the risk of acting illegally and making sure there was a big price margin on a fixed market share than a situation where you can have real competition, which could shake out the industry which could reduce the number of players and lose a cosy situation. So they obviously figured that on balance they'd go the unlawful way and preserve their price margins.

DAVID MARGAN: The cartel players met every fortnight at more than 81 informal meetings. Over lunch they would adjust prices and sometimes trade the odd 'pet' or two to maintain each company's respective market share.

It's now estimated that on average this scheme artificially inflated the price of concrete by an average of $10 per cubic metre, costing every client thousands of dollars. For example, here at Brisbane's mammoth convention centre complex, built by the Queensland Government with taxpayers' money, 50,000 cubic metres of concrete was poured, consequently the price fixing arrangement cost the Government an extra $500,000.

Investigating authorities believe one billion dollars of Queensland building contracts were caught in this web of deceit.

KERRY O'BRIEN: And that report from David Margan.

I am joined now by the Chairman of the new Competition Commission, Professor Allan Fels, from our Melbourne studio.

Allan Fels, have you seen a more blatant disregard for the law by major corporations?

ALLAN FELS: Very few. Of course, we did have one major one - TNT-Mayne Nickless - recently. But this was blatant: there were 50 meetings, hundreds of telephone calls, massive rigging of the market over five years.

KERRY O'BRIEN: Let me isolate one element of this. One company executive with Boral -involved in this case - was convicted and fined over a similar scheme in Melbourne. He was then promoted and transferred to Boral to become head of its resources division in Queensland and today he was convicted and fined again; as was Boral. What comment do you make about that?

ALLAN FELS: I believe he was named in an earlier case actually - only - but I don't think a company should tolerate a state of affairs where someone who is in big trouble in an earlier case, should then continue to manage and do the same in another State in Australia.

KERRY O'BRIEN: I am concerned to know whether, if there had been no whistleblower in this case, whether your Commission would have been able to get on to it?

ALLAN FELS: We depend on whistleblowers - in this case an ex-employee. Just a bit of information gave us the basis for the subsequent investigations but we have to have evidence.

KERRY O'BRIEN: Okay. You're now talking about the possibility of gaol sentences?

ALLAN FELS: Well, I think that's come on to the agenda of policy-making. If the fines aren't working, if the warnings aren't working, governments have to start thinking about following the US-Canadian precedent of gaol sentences.