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Alleged price-fixing at GTA construction companies

Alleged price-fixing at GTA construction companies

By: Wendy Gillis and Susan Pigg Staff Reporters, Published on Thu Jan 31 2013

Canada’s Competition Bureau has launched an investigation into allegations of wide-ranging price-fixing amongst companies that build the foundations of new homes across the GTA — a conspiracy involving inflated costs that likely increased the price of thousands of new homes built in the past 15 years.

Canada’s Competition Bureau is investigating allegations of wide-ranging price fixing among companies that build the foundations of new homes across the GTA — a conspiracy that may have added thousands of dollars in extra costs to houses built over the past 15 years.

In a court document obtained by the Star, Ottawa’s competition watchdog alleges that at least three GTA companies, and a building association, contravened the Competition Act by colluding to fix the price of concrete forming, the process of building the concrete foundation of a home.

The document, a sworn affidavit prepared by a bureau investigator, was filed last year as part of the watchdog’s effort to win a search warrant. It alleges that the Residential Low Rise Forming Contractors Association of Metropolitan Toronto and vicinity — which represents most large concrete contractors in the GTA — and three or more concrete forming companies have regularly been fixing prices since April, 1997.

It also alleges the association helped orchestrate an agreement that ensured its members would not compete with each other for contracts.

“There was an understanding or an agreement that among the alleged co-conspirators and/or their competitors that work would be allocated based on past relationships contractors had with builders. Members of the LRFA were not to compete for long standing customers (builders) of other members,” according to the document.

The search warrant was approved by an Ontario Superior court judge, and four addresses were searched in March: the LRFA office and those of Camp Forming Ltd. in Vaughan, and Mur-wall Forming and Orta Forming and Construction Ltd., both in Woodbridge.

Representatives from the three companies formed part of the LRFA board of directors beginning in 1997.

During the search, financial records, computer passwords and programs, and data were among information and items seized.

The investigation is ongoing and none of the allegations have been proven in court.

LRFA manager Grace LoGullo could not be reached for comment. Officials of the three named companies, Mur-wall Forming, Orta Forming and Construction Ltd. and Camp Forming Ltd., refused comment Thursday.

The allegations are based on information including letters, LRFA meeting minutes, surveillance of the alleged conspirators, and interviews with Lou Rocca, a former LRFA director and president of the company Halton Forming, a direct competitor with the other companies.

Rocca told the competition bureau that during his time as an LRFA director, between April 1997 and September 2010, each year “a price for the upcoming construction season was discussed and agreed to by the directors,” according to the affidavit.

Co-operation with the price and non-competition agreement was allegedly encouraged through events, paid for by the LRFA, “held so that members would … become comfortable with one another to pick up the phone and discuss prices …” according to the application.

Rocca said “Ladies Day,” was held “for the wives to fraternize and become friends so when it came to business they would encourage their husbands to ‘play like good little boys,’ ” reads the document.

Steven Silverberg, a Toronto forensic accountant, told the Star he estimated through independent research and information provided by a CBC investigation that the alleged price-fixing could have increased the cost of a new GTA home bought after 1997 anywhere from $1,500 to $4,000.

The accredited bargaining agency for hundreds of GTA homebuilders was shocked to first learn of the price-fixing allegations last June after a newspaper article made reference to an ongoing investigation by the Competition Bureau.

“We are concerned that our clients may well discover at some time that they (and the public) have been potentially exposed and victimized,” the Toronto Residential Construction Labour Bureau warns in a June 13 lawyer letter to LRFA and Labourers Local 183, the union representing construction workers, seeking answers.

Since then, builders have been stonewalled in all attempts to get more information, says Richard Lyall, executive director of the bureau, which negotiates with LRFA and Local 183 on behalf of low-rise builders.

“We’ve never received any complaints and no one has ever slipped an envelope under a door saying there was price fixing,” says Lyall. “This is a highly competitive industry. I’d be completely shocked if there was any sort of systemic price-fixing here. I can’t see how a scheme like that would escape the scrutiny of builders.”

Even if concrete companies were agreeing to set prices, builders tend to negotiate them down, he added.

There are dozens of building foundations companies operating in the GTA, unionized and non-unionized, says Lyall, who estimates that the three companies named in the court filings represent about 10 to 15 per cent of the low-rise construction industry.

Some in the construction industry believe the allegations really stem from a bitter battle, which came to a head in late 2011, when a couple of concrete company owners, one of them a very vocal Rocca, protested a move by both LRFA and Local 183 to amend their collective agreement to basically outlaw the use of cheaper non-unionized construction workers or subcontractors on job sites.

Exhibits filed with the court include handwritten notes written by an executive of Halton Forming just after a LRFA meeting in which board members discussed not accepting a new contract without checking in with the company that held it last.

The notes say an attendee described the agreement as “anti-competitive.”

“And they should be!” allegedly responded an Orta employee. “We have to control this.”

According to the notes, the objector to the non-competition agreement refers to having “to go back to the cartel and ask permission” if he wants to take on a new contract, for fear he’ll be stepping on a competing company’s turf.