Background
As a result of an investigation launched in 2019, the CMA has provisionally found that 10 construction firms colluded with each other on prices when submitting tenders for demolition and asbestos removal contracts. The collusion related to 19 contracts in total, most of which were based in London, and had a combined value of over £150 million.
The parties agreed with each other to submit overpriced bids which were purposely meant to be lost. This is sometimes also known as 'cover bidding'. Cover bidding is designed to deceive potential customers into thinking that bidders are competing against each other and that in making their choice of contractor, they are getting the best deal.
However, as noted by Michael Grenfell, the CMA’s Executive Director for Enforcement, bid rigging "can result in worse deals, which can leave businesses – and sometimes taxpayers – out of pocket".
In addition to the alleged bid rigging, the CMA has also provisionally found that 7 of these firms were part of an agreement which provided that those who 'lost' the bid would be compensated by the winner of the bid. The value of this compensation was varied, but in one instance was above £500,000.
To date, the CMA has confirmed that 8 of these 10 firms have admitted their participation in the cartels. 2 firms have denied any such involvement.
As outlined above, the CMA's findings are, at this stage, provisional only. Therefore it cannot be assumed that any of the firms involved have broken the law.
The law
Practices such as bid rigging and price fixing in the UK are illegal and fall under the list of 'hardcore' restrictions prohibited by the Competition Act 1998. If an organisation is found guilty of infringing any of the prohibitions outlined in this act, it can be fined up to 10% of its turnover. Individuals involved can also face individual fines, prison sentences and company director disqualifications.
That being said, individuals or organisations that provide evidence of cartel activity and co-operate with the CMA in any investigations being undertaken, may benefit from a reduction or immunity from such fines under the CMA's cartel leniency policy.
If you are concerned that any of your business' practices involve pricing fixing, bid rigging, or any other trading activities which fall foul of the prohibitions set out in the Competition Act 1998, and you would like advice on the options available to you, please contact us.
Written by Jonathan Branton, Dimitris Sinaniotis and Will Brownlee
