OFT fines construction firms

The Office of Fair Trading (OFT) has imposed fines totalling £129.5m on 103 construction firms in

for colluding with competitors on building contracts.

The decision follows an OFT Statement of Objections in April 2008 after one of its largest Competition Act investigations.

The OFT has concluded 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'.

Cover pricing is defined as one or more bidders in the tender process obtaining an artificially high price from a competitor. Such cover bids are priced so as not to win the contract but are submitted as genuine bids, which give a misleading impression to clients as to the real extent of competition.

This distorts the tender process and makes it less likely that other potentially cheaper firms are invited to tender.

The OFT found that in 11 tendering rounds the lowest bidder faced no genuine competition because all other bids were cover bids, leading to an even greater risk that the client may have unknowingly paid a higher price.