UK firms to face price-fixing charges

The UK's Office of Fair Trading (OFT) has issued a Statement of Objection (SO) against 112 firms operating in England's construction sector.

The UK's Office of Fair Trading (OFT) has issued a Statement of Objection (SO) against 112 firms operating in England's construction sector.

Following one of the largest ever Competition Act investigations, the OFT has formally alleged that the firms named in the SO have engaged in bid-rigging activities including cover pricing.

Some of the largest firms in the country have been named in the SO, including Balfour Beatty Group, Carillion JM, Connaught, Interserve Project Services and Kier Group.

Cover pricing arrangements have previously been found by the OFT and Competition Appeal Tribunal to be illegal and in breach of the Competition Act 1998 due to the restrictions on competition that arise.

The method involves one or more bidders colluding with a competitor during a tender process to obtain a price or prices that are intended to be too high to win the contract. The tendering authority is not made aware of the contacts between bidders, leaving it with a false impression of the level of competition and this may result in it paying inflated prices.

In addition, the SO formally alleges that a minority of the firms have entered into arrangements whereby it was agreed that the successful tenderer would pay a compensation payment to the unsuccessful tenderer. These more serious forms of bid rigging are usually facilitated by false invoices.

The SO allegations cover a wide range of projects, including tenders for schools, universities and hospitals. The OFT investigation originated from a specific complaint in the East Midlands in 2004 about a contract at Queen's Medical Centre, Nottingham.

Following evidence that the practice of cover pricing was widespread, the SO's formal allegations cover neighbouring areas including Yorkshire and Humberside. The OFT has reportedly received evidence of cover pricing implicating many more companies on thousands of tender processes, but has focused its investigation on approximately 240 alleged infringements that are being pursued in the SO.

The OFT stressed that it should not be assumed that there has been an infringement of competition law by any of the firms named. The parties will be given an opportunity to make written and oral appeals prior to a final decision being made and penalties imposed.

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