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Mon March 18 2019

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OFT cover pricing fines slashed 89% on appeal

14 Mar 11 The first six contractors appealing against bid-fixing fines from the Office of Fair Trading have had their total fines slashed from £41.8m to just £4.4m.

The Competition Appeal Tribunal (CAT) ruled on Friday that the fines were "excessive given the nature of the infringement".

The six contractors were among 103 companies fined a total of £129.5m by the OFT in September 2009 for colluding on bids. They were found to have been submitting so-called “cover prices”, putting in inflated bids for contracts that they did not want to win, but did not want to risk falling off tender lists by not submitting any bid at all. Contractors colluded to ensure that their bid was too high to win.

Friday's ruling was the first appeal to be judged by the CAT, with 19 more cases left. The case was heard by the Honourable Mr Justice Barling (presiding), Prof Andrew Bain and Peter Clayton.

Kier, facing the biggest fine of £17,894,438, had its penalty reduced by the CAT to £1,700,000.

Ballast Nedam had its £8,333,116 fine reduced to £534,375.

Bowmer & Kirkland’s original £7,574,736 fine was reduced to £1,524,000.

Corringway Conclusions’ original £769,592 fine was reduced to £119,344.

Thomas Vale’s fine was reduced from £1,020,473 to £171,000.

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John Sisk’s fine was cut from £6,191,627 to £356,250.

The fines are subject to interest at 1% above Bank of England base rate from 24 November 2009 to the date of payment.

The tribunal concluded that the penalties imposed by the OFT were “excessive given the nature of the infringement, together with the harm it was likely to cause, together with certain general mitigation, including the fact that the practice was long-standing in the industry and widely regarded as legitimate”.

It also said that for such infringements the figure of 5% of turnover in the relevant market as a minimum fine was too high, given that the maximum for the most heinous infringements was 10%.

The OFT issued its response to the appeal tribunal judgment: “Today's judgment was limited to the level of penalty for these six companies, who did not challenge our finding that they engaged in illegal cover pricing, in breach of competition law. The right to appeal against the OFT's decisions in Competition Act cases is an integral part of the competition regime and an important safeguard for parties.

”The OFT will consider this judgment in detail, alongside those in the 19 other construction cases yet to be determined, and will consider whether it should appeal to the Court of Appeal.

“Financial penalties play a key role in deterring the companies involved, and other businesses, from breaching competition law. The OFT will consider whether the judgment has any implications for its practices and policies for ensuring a high level of compliance with competition law in the future.”

The full CAT judgment can be read by clicking here

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