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Competition Appeal Tribunal upholds OFT decision in price fixing case

32/07    22 February 2007

The Tribunal has unanimously dismissed Makers UK Limited's (Makers) appeal against the OFT's finding of price fixing under the Competition Act 1998. The Tribunal has also dismissed Makers' appeal against the level of penalty.

By a Decision of 22 February 2006, the OFT found that a number of roofing contractors (including Makers) had infringed the Chapter I prohibition by colluding in relation to the making of tender bids for flat roof and car park surfacing contracts. The OFT imposed a penalty fine of £526,500 on Makers.

Makers appealed liability and on appeal submitted new evidence to refute the OFT's findings in its Decision. The Tribunal agreed with the OFT that the fact that Makers had not put forward this positive case during the administrative phase undermined the credibility of the new evidence. The Tribunal also concluded that Makers' new version of events was 'inherently unlikely'. For these reasons the Tribunal unanimously rejected Makers' version of events.

Makers also challenged the level of penalty, in particular, that it was manifestly disproportionate, and in breach of the principles of non-discrimination.

The Tribunal (by majority) rejected Makers' grounds for reducing the level of penalty imposed by the OFT. The Tribunal unanimously confirmed that the methodology used by the OFT to ensure the penalty achieved the objective of deterrence, was appropriate and that the OFT was right to seek to impose substantial penalties for infringements of this nature.

Brian McHenry, General Counsel at the OFT said:

'The OFT welcomes the CAT's judgment. Price fixing cartels are among the most serious breaches of competition law and substantially harm consumers and customers. The judgment confirms the need for penalties to operate as an effective way to deter cartel behaviour.'

NOTES

1. Interest on the penalty is to run at 1 per cent above the Bank of England base rate from the time the penalty became due.

2. The CAT's judgment of 22 February 2007 will be available at the CAT website.

3. The Competition Act 1998 prohibits agreements, concerted practices and decisions that have a damaging effect on competition in the UK. The Chapter I prohibition covers 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 control 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 worldwide turnover in its last business year.

6. 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 coerce another undertaking to take part in the cartel activity.

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