Construction industry turmoil

The Office of Fair Trading (OFT) has issued a Statement of Objections (SO) against 112 construction companies, following one of the largest Competition Act investigations. The regulator alleges that the construction companies named in the SO have engaged in bid rigging activities and in particular cover pricing.

Cover pricing, where bidders collude with a competitor to artificially increase the price of contracts, creates a false impression on levels of competition. This can result in a tendering authority paying inflated prices.

The SO also alleges that a minority of the construction companies have variously entered into one or more arrangements where the successful tenderer agreed to pay a sum of money to the unsuccessful tenderer.

The investigation originated from a specific complaint in the East Midlands in 2004 but it quickly became clear that the problem was widespread. Since then, evidence of cover pricing has implicated many more companies on thousands of tender processes but OFT has focussed the investigation on 240 alleged infringements.

Chief executive John Fingleton said: ‘Cartel activity of the type alleged today harms the economy by distorting competition and keeping prices artificially high.’

He added: ‘Businesses have no excuses for not knowing and abiding by the law.’

Details on the SO can be found here.