By Ben Kerrigan-
The CMA has provisionally found that 10 construction firms illegally colluded to rig bids for demolition and asbestos removal contracts.
The Competition and Markets Authority (CMA) has provisionally concluded that the firms colluded on prices through illegal cartel agreements when submitting bids in competitive tenders for contracts. It found the bids were rigged with the deliberate intention of deceiving the customer that they were competitive when that was not the case.
The bid-rigging investigation relates to 19 contracts worth over £150m.
Following an investigation launched in 2019, the CMA has provisionally concluded that the firms colluded on prices through illegal cartel agreements when submitting bids in competitive tenders for contracts.
These bids were rigged with the deliberate intention of deceiving the customer that they were competitive when that was not the case. Eight of the firms have admitted their involvement in at least one instance of bid rigging between January 2013 and June 2018: Brown and Mason, Cantillon, Clifford Devlin, DSM, J F Hunt, Keltbray, McGee, and Scudder
This practice, known as ‘cover bidding’ can result in customers paying higher prices or receiving lower quality services. The bids were rigged by one or more construction firms which agreed to submit bids that were deliberately priced to lose the tender. This practice, known as ‘cover bidding’, can result in customers paying higher prices or receiving lower quality services.
The CMA is proposing to impose fines on the businesses concerned if it reaches a final decision confirming that they have broken the law.
In addition, the CMA has provisionally found that 7 of the firms, on at least one occasion each, were involved in arrangements by which the designated ‘losers’ of the contracts were set to be compensated by the winner. The value of this compensation varied but was higher than £500,000 in one instance. Some firms produced false invoices in an attempt to hide this part of the illegal behaviour.
The CMA has provisionally found that the collusion affected 19 contracts for demolition work in London and the Midlands, including contracts for the development of Bow Street’s Magistrates Court and Police station, the Metropolitan Police training centre, Selfridges, Oxford University, shopping centres in Reading and Taplow, and offices on the Southbank, London. Not all of the firms were involved in colluding in each of these contracts, and not every contractor who submitted a bid for these contracts was involved in the illegal collusion.
Eight of the firms have admitted their involvement in at least one instance of bid rigging between January 2013 and June 2018: Brown and Mason, Cantillon, Clifford Devlin, DSM, J F Hunt, Keltbray, McGee, and Scudder.
Two other firms, Erith and Squibb, have not admitted their involvement in any bid rigging and it should not be assumed that they have broken the law.
Michael Grenfell, the CMA’s Executive Director for Enforcement, said:
”The construction sector is hugely important to Britain’s economic well-being. Bid rigging can result in worse deals, which can leave businesses – and sometimes taxpayers – out of pocket.
This is unacceptable, and the CMA won’t hesitate to come down hard on these activities and impose appropriate fines.
The CMA’s findings are provisional, and it should not be assumed that any company has broken the law at this stage. The final total of any fines to be paid will also be determined at the end of the investigation.
The CMA’s “Cheating or Competing” campaign has advice for businesses to help them spot, report and deter illegal anti-competitive practices such as market sharing, fixing prices and bid-rigging.
The 7 firms provisionally found to have been involved in compensation arrangements as well as cover pricing are: Brown and Mason; Cantillon; McGee; Scudder; DSM; Erith; and Squibb. Erith and Squibb are contesting the finding.
A party under investigation by the CMA may enter into a settlement agreement if it is prepared to admit that it has breached competition law, and is willing to pay a penalty and agree to a streamlined administrative procedure for the remainder of the investigation.
A statement of objections gives parties notice of a proposed infringement decision under the competition law prohibitions in the Competition Act 1998 or the TFEU. Parties have the opportunity to make written and oral representations on the matters set out in the statement of objections. Any such representations will be considered by the CMA before any final decision is made.
The final decision will be taken by a 3-member case decision group, which is separate from the case investigation team and was not involved in the decision to issue the statement of objections.
Under the CMA’s leniency policy, a business that has been involved in a cartel may be granted immunity from penalties or a significant reduction in penalty in return for reporting cartel activity and assisting the CMA with its investigation.
In this case, Scudder and McGee reported their involvement in the conduct under the CMA’s leniency policy and will benefit from a discount on any fine, provided they continue to co-operate and comply with the other conditions of the CMA’s leniency policy.
Individuals involved in cartel activity may also, in certain defined circumstances, be granted immunity from criminal prosecution for the cartel offence under the Enterprise Act 2002 and from competition disqualification proceedings. The CMA also operates a rewards policy under which it may pay a financial reward of up to £100,000 in return for information which helps it to identify and take action against cartels.