CHAPTER SEVEN
PRIVATE CARTELS AND PUBLIC INJUSTICE

Interviewer: Is there a kind of morality of money?
Barton: . . . profit . . . is a special kind of result that comes from bringing a new combination of economic factors together which . . . is to the advantage of the economy. The profit then is the entrepreneur’s reward for bringing about this new train of events.

Profiles of Power, ABC TV, 1970

Ken Thomas, sixteen years older than Barton, had also risen up from a one-truck beginning to run his own large transport empire. Thomas lived just across the bay from Barton at Castlecrag. As a young man, Thomas’ mother had been keen for him to become a minister. Indeed, by the age of eighteen he was a Presbyterian lay preacher working as a Commonwealth bank teller by day. In 1935, still at the bank and aged 22, Ken Thomas enrolled in night classes in Arts at Sydney University taking Philosophy (under John Anderson), Psychology, Latin and Greek. After graduating in Arts, like Barton, Thomas took a degree in Economics.

He founded Thomas Nationwide Transport in 1946, pioneering business-to-business freight consolidation and delivery. From the late 1950s his business had ballooned into one of the largest transport empires in the country.

Hungarian born Peter Abeles migrated to Australia as a post-war refugee in 1949 and with colleague George Rockey launched his Alltrans operation in the early 1950s. In 1967, Abeles bought Ken Thomas’ business (publicly positioned as a merger) and the new company instantly became the largest transport group in Australia, controlling around 80 per cent of the general freight market. When it came to express freight, IPEC and Rex, both now owned by Barton and Farrell, had about 50 per cent of the market, with Mayne Nickless’ Freightlines of Australia and Walter Shapaloff ’s Kwikasair carrying most of the remainder until Abeles and Thomas launched Comet.

During the late 1960s and early 1970s senior freight industry executives Ian Shortell and Les Arnold would instigate a collusive cartel. The practice worked as follows: the two companies agreed they would not try to win over the other’s customers with lower quotes. If customers themselves approached the freight competitor for a quote, it was agreed the competitor would quote higher, a practice described as ‘giving cover’. Further, if one firm won the other’s customer despite this protection, compensation was made by up-rating customers of the same value or driving them away, perhaps by missing scheduled pick-ups. It meant both TNT and IPEC became cash cows, making millions in profit each year. Company executives rationalised this collusion as ‘good for the industry’, arguing it was the only way to maintain the high levels of service to express freight clients.

However, this ‘non-compete’ agreement would regularly break down. As Bob Bass explains, a maverick IPEC salesman might reel in a large TNT client. Alarmed, IPEC head office would soon call the salesman but TNT would have already retaliated by under-quoting one of IPEC’s large clients. ‘It’s on, let’s go!’ a salesman might say to his IPEC colleague. ‘They’d know there was a bloody war on. They’d all have their targets and they’d rush out and quote them,’ recalls Bass. It would be a ‘free-for-all for about two months’, as each side poached the other’s clients.

While neither Farrell, Barton nor Abeles had instigated the collusion, once it was in place, it was difficult to walk away from. It would be Greg Farrell who found himself having to negotiate on IPEC’s behalf when the arrangement fell over. Says Freddie Gardiner: ‘It’s one of those things you had to be reasonably honest with. Greg was the sort of guy who would keep it on track because he was ethical.’

Not until ‘Abeles had rung Farrell or Farrell had rung Abeles [and said] “We gotta stop this!” would the two industry leaders meet’, admits Bass. While the minutes of such meetings might document discussions about the unions and issues such as safety in the workplace, primarily they were to call truces to the customer acquisition ‘wars’. Bass admits, ‘You’d have nine months of nothing happening, and all of a sudden it’d start up again’.

The system only worked because the two big players were prepared to take out the competition. Every time a smaller freight company started up and began undercutting and taking market share, IPEC or TNT would buy it. In 1970 IPEC acquired a controlling interest in express freight business Jetaway. The next year it gobbled up Dart Express &Phoenix Transport, and in 1972 it purchased Barlow, a general freight business.

In April 1975, IPEC group general manager Les Arnold suffered a fatal heart attack and Barton asked his loyal lieutenant Gardiner to step up to the plate. ‘What do we do about this bloody business with Shortell [meaning the cartel]?’ Gardiner asked his boss.

‘Why don’t you take them on?’ Barton suggested, meaning Gardiner should put aside past ‘non-compete’ agreements.

‘That was when the real scrap started,’ admits Bass. The result would be a disaster for IPEC and TNT both, with a price war and customer raiding that began to cripple both players.

Worse, TNT had a larger sales force than IPEC by a factor of four to one, so IPEC had to fight for its life. It was not long before Greg Farrell and Peter Abeles stepped in, calling a halt to the free-for-all. Gardiner recalls senior executives from TNT and IPEC meeting in an anonymous country motel to sort out the mess and re-establish the status quo.

Gardiner recalls that at the express freight industry’s annual meetings, the nominated chairman would close with something along the lines of ‘Well, gentlemen, that’s another good year. Congratulations to everyone. We’ll have a wonderful year as long as we’re all reasonably honest.’

It was Barton who tended to take the lead in driving up freight pricing. Office manager Fergus McPherson recalls one particular price review meeting when every IPEC state manager sat around the boardroom table as Barton canvassed their views on what sort of price rise customers would accept. Each manager argued for price rises less than the competition. When the last had finished Barton paused, thanked everyone for their input before quietly announcing IPEC prices would be set significantly higher than competitors’. The sales managers were horrified, but Barton understood market drivers. Customers stayed. To Barton it was all about setting yourselves apart—‘if we charge the most, customers will think they are getting the best’. Perhaps it was also his way of thumbing his nose at the cartel in which IPEC was trapped.

Ex TNT manager Greg Poche would later testify that the cartel’s collusive practices included agreeing to underbid on the prices of other smaller targeted companies, forcing them to sell to one of the big groups or go under. Smaller freight companies were forced to close their doors or accept a takeover offer. Market control was all important and the cartel succeeded in controlling 90 per cent of the Australian market.

Incredibly, it would be another fifteen years—by which time IPEC was in the hands of others—before the whistle was blown. At least one senior executive did not hide the paper trail sufficiently well. In a subsequent Federal Court case, the arrangements were laid out in black and white. The Trade Practices Commission brought proceedings against the three major players—Mayne Nickless, TNT and Ansett—and many of their top executives. By the end of 1994, Mayne Nickless (which had by then subsumed IPEC) was landed with the largest penalty— $6 million plus $1.3 million in court costs. Trades Practices chairman Alan Fels would announce the settlement marked the end of ‘the most blatant and extensive market-rigging case . . . The behaviour . . . represents the worst ever before the court under the [act]; the most serious economic detriment, the most sustained and systematic price-fixing case that’s ever been before the courts in Australia.’

Vietnam’s struggle for independence had been simmering for years before Australia became involved. In November 1964 Prime Minister Robert Menzies reintroduced conscription, two years’ compulsory military service for males aged twenty selected by a lottery draw of birth dates. Only students were exempt. Many were later to call it the Lottery of Death. By the end of April 1965 he had committed a battalion of 1500 Australian troops to a US-led force in Indo-China. Nine months later, in January 1966 and aged 71 years, Menzies retired after a record sixteen years as prime minister.

In March his successor, Harold Holt, announced a threefold increase in Australian forces going to Vietnam. The following month, another thousand conscripts sailed for Vietnam. In June, Prime Minister Holt paid a visit to US President Lyndon B. Johnson. Holt promised full Australian support for more troops to be sent to Vietnam, coining the soon-notorious promise to go ‘all the way with LBJ’. By mid-August, Australian troops notched up a ‘win’, killing 245 Viet Cong and losing just eighteen of their own men in a major battle at Long Tan. The toxic ‘Agent Orange’ herbicide was being regularly sprayed to poison the dense Vietnamese jungle.

While Barton was in Asia in March, the Australian Senate heard one lone voice speak out vigorously against the war. Senator Spot Turnbull had accused the government of horse-trading with the Americans: ‘It is prepared to send boys to Vietnam so that the American Government will purchase a few more Australian goods. Honourable senators opposite ought to be ashamed of themselves for supporting that.’

Having resigned as IPEC managing director to spend time with Vonnie, for the first time in his life Barton could focus on issues beyond his business. He had heard the views of anti-communist acquaintances while in Asia. He had also briefly seen communist China for himself. At home, Barton took time to study the history of the war in Indo-China. He read the official US and Australian versions of the war, as well as the conflicting historical facts. He read pieces from the likes of philosopher Bertrand Russell.

Barton concluded that Australia’s prime justification for sending troops was to ensure the Americans did not become ‘discouraged and withdraw, leaving the way open to the Vietnamese, and presumably their Chinese allies, to come down the Malay archipelago and eventually to Australia’. Such a risk of invasion simply did not make sense to his critical mind. Like Senator Turnbull, Gordon and Vonnie quickly saw through the political rhetoric so prevalent in Australia and the USA. He was stirred up.

There was plenty of political discussion in the Barton household. Always positive, Vonnie used to say that being busy was a cure for most things. The Bartons and their friends spent long evenings around the dinner table discussing the government’s perceived moral bankruptcy and the failure of either political party to address the key issues of the Vietnam War. It was the kind of home in which piles of old newspapers lay two feet high.

Like Barton, Vonnie was a non-believer. She had been deeply affected by the cruel conflict in Vietnam, campaigning vehemently against it. Her passion for helping others in need—disabled children, the elderly, the sick and those whose families needed care while they were hospitalised —marked her as a humanist. She was especially antagonistic towards the Liberal policy of conscripting young Australians to fight and potentially die in someone else’s war. She hounded her nineteen-year-old nephew incessantly to become a conscientious objector should his birthdate come up in the conscription ballot.

By October 1966 Bertrand Russell had written a powerful pamphlet, Appeal to the American Conscience on Vietnam, inviting world leaders in law, literature and public affairs to form a panel of judges to try President Johnson and his administration for war crimes against the Vietnamese people. Russell appealed to Americans: ‘Can you in your hearts, justify the use of poison chemical and gas, the saturation bombing of the entire country with jelly-gasoline and phosphorus? . . . Napalm and phosphorus burn until the victim is reduced to a bubbling mass.’

Following the IPEC AIR battle, Barton had become a well-known, well-respected champion of the fair go against oppressive government regulations. However, his niece Dianna Hand claims it was Vonnie who was most instrumental in encouraging Barton to act in relation to the war in Vietnam.

In an effort to demonstrate US solidarity and to stir local patriotism, US President Lyndon Johnson undertook to visit Australia. Since Pearl Harbor, the US–Australian alliance, cemented by the ANZUS Treaty of 1951, had been as sacrosanct as motherhood, but this would be the first time a US president had visited the country. The press went wild with excitement.

Barton and Vonnie reasoned that it would be a shame if President Johnson returned home believing all Australians were enthusiastic allies. Barton determined to write Johnson a letter expressing his concerns. He could attempt to deliver the letter by hand while Johnson was in Sydney, but there was no guarantee it would be read. If he posted it, Barton could not be sure his letter would reach the president. An open letter in the press, however, was a different story. Placed prominently in a major newspaper, it would be hard to ignore. Such a letter might also encourage his fellow Australians to consider their own positions.

Barton could afford the $1782 to take a full page in the Sydney Morning Herald and he booked the space without mentioning the content. He wrote the letter with care and delivered it to the Herald ’s office in Broadway the day prior to publication, handing it to the chief-of-staff only to be told, ‘This is very controversial material. I’m afraid we can’t run it.’ Barton asked to speak to the editor or, failing that, Mr Fairfax himself. An hour later he was advised the letter would appear in full. An advertiser was an advertiser and the broadsheet publisher was well aware that there was a huge amount of anti-war feeling in the community.

The decision would spark a flame that would soon blaze as a powerful third voice in the arid Australian political landscape.