UK: Office of Fair Trading to Target the Construction Products Sector

Last Updated: 10 February 2005
Article by Guy Lougher, Alan Davis and Giles Warrington

The Office of Fair Trading (OFT) has just announced that during 2005, the construction and housing market, including services related to them, will be one of its five top priority areas for competition law enforcement. The OFT has announced that public procurement will be another. The OFT investigations will extend to and affect manufacturers of construction products.

This means that during 2005, home and building products manufacturers will become the focus of OFT investigations, including unannounced dawn raids. Companies that have breached the UK's competition rules face the risk of serious fines and individuals directly involved in serious anticompetitive behaviour also face the threat of criminal prosecution.

The OFT's recent fining of a number of companies in the roofing and double glazing sectors and its current investigation of several more suspected cartels in the construction industry, give a flavour of the impact of the OFT's 2005 focus.

What issues does the construction products sector face? Dawn raids

Dawn raids will become more prevalent in the sector. Officials undertaking dawn raids usually arrive unannounced and intent on unearthing evidence of anti competitive behaviour: cartels, resale price maintenance, market abuses etc. They will usually search through offices, cars, computer systems and sometimes homes, for incriminating e-mails and hard copy documents. They may even require premises and computer systems to be sealed. The resulting business disruption can be huge and costly. Raids associated with the criminal cartel offence (price fixing etc.) are liable to be even more aggressive and considerably more disruptive. Careful handling of a dawn raid is essential: too light a touch can result in officials seeing documents to which they are not entitled and employees making damaging statements unnecessarily; too heavy a touch can result in a criminal charge of obstruction. The company will also need to consider other pressing issues such as publicity, whether to seek leniency, stock market reporting obligations and what to tell staff etc.

Detailed written investigations

Even if the OFT does not conduct a dawn raid, it may still require companies to provide a written response to a lengthy series of detailed questions. Responding to such a request requires care and experience. Providing a false or misleading response to an OFT information request is a criminal offence. However, on the other hand, a company may unwittingly and unnecessarily provide the evidence needed by the OFT to conclude that there has been a breach of the competition rules. A company faced with an information request may also need to consider whether it should invoke the OFT's leniency programme and admit that it has breached the competition rules, in return for an agreement by the OFT not to impose fines or other sanctions.

Applications for leniency

An early approach for leniency can secure 100% immunity from fines. A company applying for leniency will need to be the first company to provide the OFT with information about anti-competitive behaviour in its sector. By doing so, the company may escape fines, but its testimony would provide the evidence to allow the OFT to take action against other companies that had breached the competition rules. Whether or not to apply for leniency is a commercially critical decision and, if sought, leniency must be applied for quickly and correctly. Experience really counts in this regard.

Advice on implementing a competition compliance Programme

Pinsent Masons' EU and Competition expertise and our Home and Building Products sector knowledge offers a powerful combination to tackle OFT investigations in the construction products sector, successfully and commercially. Having been involved in the OFT's first ever dawn raid (Arriva/First Group) and many others since, our experience in this area is second to none. Described in the 2004 Chambers' Guide as ‘a leading port of call for EU and UK competition law’, we have the expertise and experience to guide you through a business-critical investigation. We can provide you with:

  • advice on minimising competition risks
  • advice on implementing a competition compliance programme
  • competition law training seminars tailored to your needs, including mock dawn raids
  • an assessment of your company's readiness to cope with a dawn raid and checklists of dawn raid ‘Do's and Don'ts’ for staff to keep handy
  • on-the-spot assistance, if the OFT launches a dawn raid on your company or sends you a request for information.

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Pinsent Masons' EU and Competition Group - An Overview Resource

Our EU and Competition Group comprises 4 partners and 9 other qualified lawyers and is spread across London, Birmingham and Leeds. All members are experienced competition lawyers who work exclusively in this field. This makes us one of the largest EU and Competition groups in the UK and provides us with the resource and geographical spread to respond quickly and effectively to OFT investigations, including those involving multiple sites.

Experience in Dawn Raids

As mentioned above, we were involved in the OFT's first ever dawn raid (Arriva/First Group). We have since acted on eight other civil dawn raids (EU and UK) and recent recruits to the group bring with them experience in five further raids.

Cartel Investigations

We have acted on nine substantial cartel investigations (EU and UK) in sectors including building products, construction, dairies, retailing and independent schools. In one instance, after a long running investigation, we were able to persuade the OFT to drop its case entirely. The EU cases have been particularly complex, involving allegations of multi-layered cartels operating in numerous countries over prolonged periods.

Leniency

As mentioned earlier, experience really counts when it comes to applications for leniency. We have assisted a number of clients in successfully seeking post-raid leniency and have recently undertaken a detailed assignment for a client considering whistle-blowing leniency.

General Competition Law Experience

In addition to advising on OFT investigations, our EU and Competition Group advises companies generally on the application of EU and UK competition law, to trading agreements and practices, including advising companies that may be dominant, on their particular legal responsibilities. In addition, we also advise companies on sector inquiries by the OFT and the Competition Commission.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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