OFT issues statement of objections against 112 construction companies

Citation

(2008), "OFT issues statement of objections against 112 construction companies", Structural Survey, Vol. 26 No. 5. https://doi.org/10.1108/ss.2008.11026eab.003

OFT issues statement of objections against 112 construction companies

Article Type: Newsbriefs From: Structural Survey, Volume 26, Issue 5

Keywords: Competition, Construction

Following one of the largest ever Competition Act investigations, the Office of Fair Trading has issued a Statement of Objections (SO) against 112 firms in the construction sector in England. The OFT formally alleges that the construction companies named in the SO have engaged in bid rigging activities, and in particular cover pricing. Cover pricing describes a situation where one or more bidders collude with a competitor during a tender process to obtain a price or prices which are intended to be too high to win the contract. The tendering authority, for example a local council or other customer, is not made aware of the contacts between bidders, leaving it with a false impression of the level of competition and this may result in it paying inflated prices. Cover pricing arrangements have previously been found by the OFT and the Competition Appeal Tribunal to be illegal and in breach of the Competition Act 1998 due to the restrictions on competition that arise. In addition, the SO formally alleges that a minority of the construction companies have variously entered into one or more arrangements whereby it was agreed that the successful tenderer would pay an agreed sum of money to the unsuccessful tenderer (known as a “compensation payment”). These more serious forms of bid rigging are usually facilitated by false invoices. The construction companies under investigation carry out general building work including construction of housing, as well as commercial and industrial construction both in the public and private sector. The SO allegations cover a diverse range of projects, including tenders for schools, universities and hospitals.The OFT’s investigation originated from a specific complaint in the East Midlands in 2004, but it quickly became clear from the evidence that the practice of cover pricing was widespread. The SO’s formal allegations therefore cover neighbouring areas including Yorkshire and Humberside and also elsewhere in England. The OFT has also received evidence of cover pricing implicating many more companies on thousands of tender processes, but has focused its investigation on approximately 240 alleged infringements which are being pursued in the SO.