On Thursday 22 March 2007 the Office of Fair Trading (OFT) issued two press releases relating to its ongoing investigation of alleged bid rigging in the UK construction industry.
In them, the OFT advises as follows:
- for the last two years, it has been conducting an investigation into bid rigging by construction companies in England
- during the investigation 57 companies have undergone OFT ‘dawn raids’, and 37 companies have applied for ‘leniency’
- the investigation has uncovered evidence of bid rigging in thousands of tenders with a combined estimated value approaching £3 billion
- the investigation has uncovered evidence of bid rigging activities which include cover pricing, where companies obtain a price from a competitor in the tender process which is not designed to win the contract but is intended to give the appearance of competition
- the investigation has also found evidence of compensation payments or 'bungs' being passed between competitors in exchange for a cover price
- the investigation has focused in particular on the East Midlands, Yorkshire and Humberside areas, and those regions surrounding these areas
- the OFT has also found some bid rigging activities in other parts of England
Specifically, the first press release advises that the OFT has written to businesses that are a suspect party in the cartel investigation, but have not so far applied for leniency. It has notified them that it will be making them an offer of a reduced financial penalty, in exchange for admissions to participation in bid rigging and certain ancillary promises. According to the OFT, the reductions in penalty available to these companies will not be as large as those available to the companies that have applied for leniency, but will still be significant.
The second press release announces that the OFT will not consider any further applications for leniency in relation to its ongoing investigation. However, companies may still apply for leniency to the OFT for matters outside the scope of the current investigation, such as bid rigging activities outside England, or in construction-related industries such as civil engineering or highway maintenance.
This is a very significant development for the construction industry. Competition enforcement action is underway, and appears well advanced. The OFT is now seeking to ‘fast-track’ its investigation, and there is a real prospect of significant fines being imposed.
More information is available on the OFT website: www.oft.gov.uk
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