Price-fixing plot

The Office of Fair Trading (OFT) has issued fines to 103 construction firms after they were found to have colluded with competitors to fix the price of building contracts.

The OFT investigation into the activities of building firms under the Competition Act 2006 found that firms had been involved in rigging 199 tenders between 2000 and 2006 through the practice of “cover pricing”.

That activity involves one or more bidders in the tender process receiving artificially high prices from a competitor. These bids are then submitted, not with the intention of winning the bid but rather to distort the true picture of competition.

The OFT imposed a total of £129.5m in fines. Eighty-six of the 103 firms involved admitted their involvement prior to the announcement and received reductions of their penalties of up to 65%.

The investigation involved some of the most well-known construction firms in the UK. The investigation, which focused primarily on the East Midlands, Yorkshire and Humberside regions, resulted in a £17.9m fine for Kier Group plc. Interserve was fined £11.6m while 11 further companies were fined more than £5m each.

Stephen Ratcliffe, director of the UK Contractors Group, said that the fines could not have come at a worse time for the construction industry and warned that firms may find it difficult to absorb the fines.

“Everybody knows—including the OFT—that cover pricing was widespread in the industry in the past. It is perverse and unfair to impose such disproportionate penalties on a small number of contractors selected by geographical sampling,” he said.

Ratcliffe added that the infringements that the OFT investigated were historic and “do not reflect practices in today’s market”.