OFT Issue Statement: Following one of the longest ever Competition Act investigations, the Office of Fair Trading (OFT) has issued a Statement of Objections (SO) against 112 firms in the construction sector in England. The OFT said its investigations, first started in 2004, following an initial complaint regarding building contracts at Nottingham’s Queens Medical Centre.
OFT Issue Statement: The OFT accused 112 construction companies of ‘rigging’ bids for contracts. It said the firms colluded among themselves while bidding for contracts, leading to customers such as local authorities, having to pay too much.
The OFT added that in a few cases firms entered into agreements whereby the successful tenderer would pay a sum of money to those that lost out. It said 40 firms had admitted price fixing and 37 had asked for leniency. The cartel practice involved the use of false invoices.
John Fingleton, chief executive at OFT said, “Cartel activity of the type alleged harms the economy by distorting competition and keeping prices artificially high. Businesses have no excuse for not knowing and abiding by the law.”
The firm’s strategy at the centre of the bid rigging was ‘cover pricing’ whereby one or two bidders would collude with another to deliberately offer the customer a price that was too high to win the contract. The OFT added that ‘a minority’ of firms made arrangements whereby the winner of the bid would make a payment to those companies that deliberately lost out.
Any construction company found to be a member of a cartel can be fined up to 10 per cent of its annual turnover, but penalties are reduced for those who co-operate with an investigation.
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