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ILLEGAL CARTELS IN THE CONSTRUCTION INDUSTRY

In June 2022, the UK’s competition regulator, the Competition and Markets Authority (CMA) made a provisional finding that 10 construction firms had illegally colluded to rig bids for demolition and asbestos removal contracts.

Chapter I of the Competition Act 1998 prohibits agreements, decisions and concerted practices between undertakings which have as their object or effect the restriction, distortion, or prevention of competition within the UK.

Bid rigging
Also known as collusive tendering, occurs where two or more entities collude as to their response to invitations to tender. The collusion can take a variety of forms, for example agreeing that both parties will submit bids with identical pricing, bid rotation (where firms take it in turns to “win” a contract), bid suppression (where firms agree not to bid) and covering pricing (where a firm agrees to submit an artificially high bid). Bid rigging is considered to affect competition by increasing prices, sharing markets and lowering the quality of services.
Any form of bid rigging will almost certainly foul of the competition regime, exposing those involved to a fine of up to 10% of their global turnover.
This particular case concerned a form of cover bidding, whereby those involved agreed to submit bids that were deliberately priced to lose the tender. In some instances, the “losers” of the contracts were set to be compensated by the winner.

Provisional findings

  • The CMA found that there was collusion affecting 19 contracts for demolition work in London and the Midlands, including contracts for the development of Bow Street’s Magistrates Court and Police station, Selfridges, Oxford University and offices on the Southbank.
  • Eight of the firms involved admitted their participation in the alleged bid rigging and agreed to pay fines under the CMA’s settlement policy, under which, provided the participant complies with the terms of settlement, the level of fine is discounted to reflect the resource saving to the CMA as a result of the admission and co-operation with the investigation. 
  • Two of the firms reported their involvement under the CMA’s separate leniency policy, under which businesses that provide evidence of cartel activity and co-operate with the CMA’s investigation can benefit from a reduction in, or in some circumstances, complete immunity from penalties.
The CMA’s investigation is still ongoing and the level of fines to be paid will be determined at the conclusion of this investigation.

Provisional findings
  • The CMA found that there was collusion affecting 19 contracts for demolition work in London and the Midlands, including contracts for the development of Bow Street’s Magistrates Court and Police station, Selfridges, Oxford University and offices on the Southbank.
  • Eight of the firms involved admitted their participation in the alleged bid rigging and agreed to pay fines under the CMA’s settlement policy, under which, provided the participant complies with the terms of settlement, the level of fine is discounted to reflect the resource saving to the CMA as a result of the admission and co-operation with the investigation. 
  • Two of the firms reported their involvement under the CMA’s separate leniency policy, under which businesses that provide evidence of cartel activity and co-operate with the CMA’s investigation can benefit from a reduction in, or in some circumstances, complete immunity from penalties.
The CMA’s investigation is still ongoing and the level of fines to be paid will be determined at the conclusion of this investigation.
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Brandsmiths is a trading name of Brandsmiths S.L. Limited which is authorised by the Solicitors Regulatory Authority, SRA No: 620298. Founding Partner: Adam Morallee

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