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OFT FINES: 103 firms found guilty of cover pricing fined £130m

The Office of Fair Trading has fined 103 construction companies a total of £129.5 million after they were found to have colluded on building contracts.

The firms were each fined an average of £1.26 million – or 1.14 per cent of their annual worldwide turnover.

It said the decision followed what was one of its largest ever Competition Act investigations.

The OFT said that the firms engaged in “illegal anti-competitive bid-rigging activities” on 199 tenders from 2000 to 2006, mostly in the form of cover pricing.

However the competition watchdog said it had uncovered six instances of bid rigging where successful bidders had paid an agreed sum of money to the unsuccessful bidder. The payments, of between £2,500 and £60,000, were facilitated by the raising of false invoices.

The OFT also said that in 11 tendering rounds, the lowest bidder faced no genuine competition because all other bids were cover bids. This lead to “an even greater risk” that the client paid a higher price than it should have for the work, it added.

The breaches affected a series of building projects across England, including schools, hospitals and residential schemes, worth a total of more than £200 million.

OFT senior director Simon Williams said: “Bidding processes designed to ensure clients and in many cases taxpayers receive the best possible choice and price were distorted, creating a real risk of increased prices.

“This decision sends a strong message that anti-competitive and illegal practices, including cover pricing, must cease.”

Discounts were given to 86 of the firms because they had admitted their involvement – including applications for leniency or the OFT’s fast track offer.

There were 33 parties that benefited from discounts on the levels of fines of between 35 and 65 per cent under the OFT’s leniency programme, and 41 others received up to 25 per cent discount under the fast track offer.

In total fines have been reduced from a pre-discount level of £194.4million – a reduction of £64.9million.

A further 12 parties received smaller reductions in fines for admissions after receiving the statement of objections.

The OFT has also informed nine companies originally named last year that it will not pursue allegations of bid-rigging against them. It said there insufficient evidence to proceed to an infringement finding.

Mr Williams added: “The OFT welcomes initiatives by the leadership of the construction industry to add weight to that message through a clear compliance code which we hope will help to embed more fully a culture of competition within the construction sector.”

A new code of conduct was launched by the UK Contractors Group and National Federation of Builders, through Construction News, last month.