Further reductions in UK cartel fines

29 March 2011

The UK Competition Appeal Tribunal has continued to reduce "excessive" fines levied against construction companies accused of cartel activity, cutting penalties imposed against a further six contractors.

Fines totalling £ 15,5 million levied by UK regulator the Office of Fair Trading (OFT) against Galliford Try and five other construction companies in a bid-rigging cartel have been reduced by -76% to £ 3,8 million on appeal.

The tribunal ruled that the OFT had miscalculated the annual turnover against which the penalties should have been determined, and had imposed "disproportionate" fines as a result.

In total, the OFT imposed original penalties of £ 129,2 million (€ 149 million) against 112 construction companies in September 2009, including the UK's two largest contractors, Balfour Beatty and Carillion.

The companies had admitted to cover pricing - a process which involves deliberately submitting higher tenders with the aim of remaining on the client's tender list for future contracts instead of winning the contract being tendered.

Earlier in March, the Competition Appeal Tribunal reduced similar fines imposed on Kier Group and five other construction companies by £ 37 million (€ 42,6 million).

Kier and the other contractors argued that the OFT had failed to account for their low profit margins or early admission of bid rigging when imposing the high penalties.

The appeal tribunal agreed, ruling, "The penalties imposed by the OFT on each of the appellants for 'simple' cover pricing were excessive given the nature of the infringement ... including the fact that the practice was long-standing in the industry and widely regarded as legitimate."

And in its latest judgment, the appeal court added that the OFT had also failed to take into account the high turnover and low margin nature of the construction industry as a whole - a factor which should have been relevant when calculating the penalties.

The tribunal must still rule on appeals from 13 other construction companies accused in the case. However, the OFT could still appeal the Court of Appeal rulings if it does not agree with the lower penalties.