Corporate thriller out of the box

Email Printer friendly version Normal font Large font Chris Johnston

October 17, 2007

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IF YOU were a secret business cartel price-fixing, say, cardboard boxes, where would you go to do it? To actually talk the talk? Bearing in mind that it is a highly lucrative but highly illegal activity.

The fine print in the Visy case - in which the billionaire Richard Pratt's company colluded with its rival Amcor to raise prices - reveals the dirty business done was incognito and often in the most mundane places. Like white-collar crime fiction, only real.

A contrite Pratt faced a Federal Court penalty hearing in Melbourne yesterday after settling with the Australian Competition and Consumer Commission and agreeing that he and his Visy group should pay a record $36 million fine. But how were the secret deals done? In nondescript Melbourne pubs, largely. Even Pratt, Australia's third-richest businessman famed for his philanthropy, would meet his Amcor rival in a pub.

The trick that the former Visy general manager Rod Carroll and Amcor's then general manager of sales, Edward Laidlaw, used was to be anonymous and ordinary. Like at the Cherry Hill Tavern in East Doncaster, Melbourne.

It seems totally appropriate that fixing increasingly higher prices for cardboard products such as pizza cartons and fast-food packaging be executed in a place like this - a big pub like any other throughout the mortgage belt; steak-and-chips bistro with adjoining playroom for the kids, TAB, sports bar. For the now disgraced executives this was a perfect place to blend in.

It all began in early 2000 when, the competition commission says, the two companies began conspiring at the Glen Iris home of Peter Brown, former managing director of Amcor Australasia. With him was Harry Debney, Visy's chief executive.

In mid-2000 lieutenants were appointed to continue the deals - Carroll from Visy and Laidlaw from Amcor. They met at Rockman's Regency Hotel in the city, now the Marriot. Carroll told Laidlaw he would buy him a pre-paid mobile phone.

The pair then met "30 to 40" times between July 2000 and November 2005. Calls were sometimes made from phone boxes to the pre-paid mobile. Debney and Brown met occasionally, at the VIP-only Crystal Club in Crown Towers.

In May 2001, Pratt himself met Russell Jones, the former managing director and chief executive of Amcor, at Richmond's All Nations Hotel, a neighbourhood pub in the shadow of the housing commission flats where Jones was a regular.

Pratt, supported yesterday by his friend of 50 years and Pratt Foundation boss Sam Lipski, listened to the commission outline the deal that lasted almost five years.

"The collusion involved both price fixing and market sharing measures, was deliberate, was brought about and sanctioned at the highest levels of the companies concerned, and was very carefully and deliberately concealed," Peter Jopling, QC, for the commission, told the court.

It was Debney who set up an "overarching understanding" with Amcor in 2000 after a price war between the packaging giants, which controlled 90 per cent of the market. Under the arrangement Visy and Amcor sought to maintain market share and collaborate on raising prices.

Debney, who "somewhat surprisingly still remains in his position", then deputised Carroll to look after the day-to-day running of the deal, which resulted in a 20 per cent price rise over those years, Jopling said.

"The conduct overall shows a blatant disregard for the law and a cynical culture of evasion of the proper obligations of senior corporate citizens and their high-level executives," he said.

The arrangement affected thousands of Visy's and Amcor's non-contract customers along with some of Australia's biggest food and beverage companies, including Ingham's, Goodman Fielder, Foster's, Nestle and Cadbury Schweppes. Jopling urged Justice Peter Heerey to reject a public apology issued last week by Pratt, who said Visy senior executives had not properly understood the complexities of the Trade Practices Act.

"The contraventions were clearly deliberate and were committed in the consciousness of illegality," the barrister said. "The significance of giving his imprimatur to the over-arching understanding is very great."

Outside court, Pratt apologised again. "I know a lot more now than I knew then, but I sincerely regret what happened and I accept ultimate responsibility," he said. He would not comment further.

Visy and Amcor are defending a class action by thousands of non-contract customers who claim the cartel cost the market up to $700 million.

These customers will read with keen interest the details of Carroll and Laidlaw's shadowy meetings, which happened about every six weeks for 3½ years. These were the nuts-and-bolts of the cartel. Handshakes conspired to make a few a lot richer at the expense of average consumers.

They met at the Elizabethan Lodge in Blackburn North, a suburban motel billing itself as"perfect old world luxury in new world style".

The pair apparently used the renovated bar of another motel, the humbler Tudor Box Hill. Again, suited men talking softly, having a drink, no surprises there. Nothing to attract attention.

They made themselves appear even smaller and discouraged surveillance by taking their illegal deals outside, into the wilds of parks and nature reserves and sports grounds.

And to Myrtle Park in North Balwyn. Maybe they walked as they talked to appear more everyday. Or maybe they jogged. Perhaps they wore shorts and sweated as they agreed to rip off their customers, and their customers' customers? Or maybe that makes the whole saga sound a bit too much like crime fiction.