Shares in Downer EDI, Ventia tank on ACCC price fixing claims
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More news: Shares in Ventia Services Group and Downer EDI dived in morning trade on the ASX after the Australian Competition and Consumer Commission (ACCC) started civil cartel proceedings against subsidiaries of the two listed services groups.
Ventia shares fell 10.9% to $3.83 by 11:55am AEDT while Downer shares were down 5.3% to $5.41. Both companies' shares have gained more than 20% since January.
Industrials was the worst performing sector, down 1.08%, while the wider ASX 200 fell 0.04%.
Downer EDI, Ventia hit with ACCC price fixing allegations
The news: The Australian Competition and Consumer Commission (ACCC) has started civil cartel proceedings in the Federal Court against subsidiaries of ASX-listed services groups Downer EDI and Ventia Services Group for alleged price fixing related to services for the Department of Defence.
Downer said it "categorically denies" the allegations and will "vigorously defend any proceedings". Ventia said it is reviewing the allegations and does not intend to comment further.
The numbers: Downer (-2.3%) and Ventia (-0.7%) both opened lower in morning trade after the announcement.
The context: The ACCC said that Downer-owned Spotless Facility Services and Ventia's Australia subsidiary each provided services to Defence under separate billion-dollar contracts to over 200 major Australian Defence Force (ADF) bases and other properties across Australia.
The regulator alleges that on three occasions between April 2019 and August 2022, Ventia and/or Spotless "made or attempted to make arrangements or understandings containing provisions which had the purpose, effect or likely effect of fixing controlling or maintaining the prices at which these services would be supplied to Defence".
The ACCC alleges this is a breach of the cartel provisions in the Competition and Consumer Act.
Senior Spotless executives Jacob Bonisch and Jeffrey Collins, and senior Ventia executives Gavin Campbell and Lena Parker are alleged to be involved in aspects of the conduct.
The regulator is seeking declarations, civil penalties and costs against the companies, as well as the four senior executives. It is also seeking disqualification orders against three of the executives in relation to the alleged conduct.
Downer said that it sought to engage with the ACCC in its confidential investigation and is of the view that neither Spotless nor the two Spotless employees referred to by the regulator engaged in unlawful conduct.
The company added that it "takes compliance with its regulatory obligations very seriously, and is confident it has a robust governance framework in place to manage risk and support compliance with Australian competition law by its employees and subcontractors".
What they said: "The allegations in this case relate to alleged conduct by two large, sophisticated companies providing services which are critical to the operation of Australian Defence facilities under longstanding, publicly funded Defence procurement contracts," said ACCC chair Gina Cass-Gottlieb.
"We allege this conduct cause direct harm to the Commonwealth and ultimately Australian taxpayers.
"One of the programs of work that we allege was the subject of a price fixing agreement related to a program funded by the Australian government to stimulate work for small to medium enterprises during the COVID-19 pandemic, when many individuals and businesses were experiencing financial hardship."
Downer CEO Peter Tompkins said: "Downer is committed to best practice governance and risk management and continues to invest heavily in its compliance systems and processes".
The sources: ACCC media release, ASX announcement, ASX announcement
