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OFT welcomes CAT judgment on construction contract collusion

36/05    24 February 2005

The OFT welcomes the judgments given today by the Competition Appeal Tribunal (CAT) on the appeals brought by Apex Asphalt and Paving Co Ltd and Richard W Price (Roofing Contractors) Ltd.

The CAT upheld the OFT's decision that the two roofing contractors had, along with seven others, agreed to fix the prices by collusive tendering of repair, maintenance and improvement services for flat roofing in the West Midlands.

The CAT upheld both the findings in the OFT decision and the fine imposed on Apex (£35,922); it reduced the fine in the case of Richard W Price (from £18,000 to £9,000). It confirms that the parties did engage in collusive tendering.

Welcoming the judgment, John Vickers, OFT Chairman, said:

'Evidence on cartel activity in the construction sector – from leniency applicants and site visits – is mounting. The West Midlands roofing case is likely to be the first in a series of construction cartel cases.

'This cartel rigged bids – so raised prices – on contracts relating to a number of schools, a community library, a shopping centre and a car park. The victims were council tax payers in Dudley and the West Midlands.'

NOTES

1. See OFT press release 46/04 for more details on the original decision.

2. The other businesses fined were: Briggs Cladding & Roofing Limited (£ nil, following 100 per cent leniency), Brindley Asphalt Limited (£55,540), The General Asphalte Company Limited (£63,192), Howard Evans (Roofing) Limited (£35,510, following 50 per cent leniency), Redbrook Mastic Asphalt and Felt Roofing Limited (£17,802), Rio Asphalt & Paving Co. Limited (£45,049), and Solihull Roofing and Building Co Limited (£26,606).

3. 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.

4. 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.

5. Penalties for breaching the Competition Act can amount to up to 10 per cent of an undertaking's UK turnover for each year of an infringement, subject to a maximum of three years. (NB Since this decision was made in March 2004 the penalty has changed to up to 10 per cent of an undertaking's worldwide turnover in its last business year. See the OFT guidance as to the appropriate amount of a penalty).

6. The OFT guidance at the time said that the OFT can offer leniency to undertakings that come that forward with information about a cartel that they are involved in.  Total immunity from financial penalty total immunity is available to the first member of the cartel to come forward with relevant information. Significant reductions in penalty of up to 50 per cent are available in where: (i) the undertaking 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 (ii) where the undertaking would have qualified for total immunity had it not been the instigator or leader of the cartel or compelled others to join.

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