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Scottish roofing contractors fined for collusive bidding

Since this notice was published, there has been an amendment to the name of one of the parties to Advanced Roofing Systems Limited.

126/05    12 July 2005

Six roofing contractors have been found by the OFT to have agreed to fix the prices of flat roofing services in Western-Central Scotland through collusive tendering. They have been fined almost £260,000 in total (reduced to about £138,000 by leniency).

The parties (see note 1) were found to have been involved, to varying degrees, in a series of individual agreements and/or concerted practices in tendering for flat roofing contracts from 2000 to 2002 in breach of the Chapter I prohibition of the Competition Act 1998.

The contracts affected were for felt and single ply flat roofing services. The range of customers affected were diverse, including a hospital, a school and several banks.

The OFT concluded that the parties' collusion in setting tender prices was intended to restrict or distort competition and meant that buyers were unable to obtain competitive prices when buying flat roofing services.

Sir John Vickers, OFT Chairman, said:

'Collusive tendering deprives customers of the benefits of competition. In this case a hospital, school and council tax payers were disadvantaged by these anti-competitive agreements.'

The decision is one of several by the OFT concerning collusion in the supply of roofing services. In March 2005, the OFT issued two decisions relating to roofing services: mastic asphalt flat-roofing contracts in Scotland, and felt and single ply flat-roofing contracts in the North East of England (see press release 48/05) (see note 2). An earlier decision, issued in March 2004 relating to flat roofing contractors in the West Midlands was recently upheld by the Competition Appeal Tribunal (see note 3). The OFT is continuing to investigate other allegations of collusive tendering in relation to flat roofing.

Agreements or concerted practices between businesses that fix prices and share markets by way of collusive tendering are among the most serious infringements of the Competition Act (see notes 4 and 5). Financial penalties are being imposed on parties, subject to the operation of the policy to give lenient treatment for undertakings coming forward with information in Competition Act cases (see notes 6 and 7).

In line with the OFT's leniency policy Pirie Limited has been granted 100 per cent leniency in recognition of the fact that Pirie was the first party to apply for leniency and volunteer information in connection with the OFT's pre-existing investigation in this case. In addition, due to the information that it gave in relation to this investigation, Pirie was also granted an uplift under 'leniency plus' for the OFT's recent decision concerning mastic asphalt flat-roofing contracts in Scotland (see note 8). Walker has been granted 45 per cent leniency. The financial penalties on those parties are being reduced accordingly.

The full text of the decision will be available soon, the summary is currently available from the CA98 Public Register decisions section.

Construction and housing markets form one of the OFT's current priority areas of work.

NOTES

1. The businesses and number of infringements involved in the OFT investigation (fines in brackets) were:

2. The OFT's decision of 15 March 2005 relating to collusive tendering for mastic asphalt flat-roofing contracts in Scotland is available from the CA98 Public Register decisions section, and the OFT's decision of 16 March 2005 relating to collusive tendering for felt and single ply flat-roofing contracts in the North East of England is also available from the CA98 Public Register decisions section.

3. The OFT's decision of 16 March 2004 relating to flat roofing in the West Midlands is available from the CA 98 Public Register decisions section. The CAT's judgments of 24 February 2005 dismissing appeals brought by Apex Asphalt and Paving Co Limited and Richard W Price (Roofing Contractors) Limited are available at the CAT website.

4. The Competition Act 1998 prohibits agreements, practices and conduct that have a damaging effect on competition in the UK. The Chapter I prohibition covers anti-competitive agreements and concerted practices, that have the object or effect of preventing, restricting or distorting competition in the UK or a part thereof.

5. Cartels are a particularly damaging form of anti-competitive agreement. Their purpose is to increase prices and as a result they cause harm to the consumers of the goods or services concerned. Any undertaking found to have engaged in cartel activity is likely to face a particularly high financial penalty.

6. Penalties for breaching the Competition Act can amount to up to 10 per cent of an undertaking's worldwide turnover in its last business year.

7. The OFT can offer leniency to undertakings that come forward with information about a cartel in which they are involved. Total immunity from financial penalty is available to the first member of the cartel to come forward with relevant information before the OFT has commenced an investigation. Significant reductions in penalty of up to 100 per cent are available where the undertaking is the first to come forward with information but does so after the OFT has commenced an investigation; and reductions of up to 50 per cent are available where the undertaking (a) is not the first to come forward with information but does so before the OFT has given written notice of its proposal to make a decision that the Chapter I prohibition has been infringed or (b) would have qualified for total immunity or a reduction in penalty of up to 100 per cent had it not taken steps to corece another undertaking to take part in the cartel activity.

8. 'Leniency plus' may lead to an additional reduction in financial penalties in relation to a first market where a leniency applicant also provides information regarding a second market which was not previously under investigation by the OFT.

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