Australia’s Downer EDI Shares Fall on Regulatory Action

Shares of the ASX-listed Downer EDI Limited (AU:DOW) fell today after the company faced regulatory action from The Australian Competition & Consumer Commission (ACCC). The country’s competition regulator has filed a lawsuit against Downer and its rival Ventia Services (AU:VNT), accusing them of price-fixing services for contracts with the defense department. Following the announcement, Downer EDI’s stock dropped over 7%, while Ventia Services shares plunged 23.26% as of writing.

Downer and Ventia provide services across Australia and New Zealand, across multiple sectors.

Downer EDI Faces Civil Proceedings

The ACCC claims that between April 2019 and August 2022, Ventia Australia and Downer-owned Spotless Facility Services participated in forming agreements to manipulate prices for estate maintenance and operational services delivered to the Department of Defense.

Consequently, the ACCC has initiated civil cartel proceedings in the Federal Court against these companies and is pursuing legal declarations and civil penalties in connection with the alleged conduct. Notably, the regulator named four executives in the court case who were involved in price fixing.

On the other hand, Downer has firmly denied the allegations and is ready to defend itself. Meanwhile, Ventia acknowledged the claims, noting that it is currently reviewing them and will refrain from further comment. Both Ventia and Spotless have billion-dollar contracts with the Department of Defense, which are set to expire in mid-2025. These contracts are crucial to Downer and Ventia’s operations and provide a steady source of income.

Is Downer EDI Stock a Buy, Sell, or Hold?

According to the TipRanks, DOW stock has a Hold consensus rating based on one Hold recommendation from RBC Capital. The average Downer EDI share price target is AU$5.99, which is 12% above the current trading levels.

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