CMA fines ten building firms nearly £60m for ‘cover bidding’

Ten construction firms have been fined by Britain’s competition regulator after they were found to have engaged in bid rigging.

The building companies have been ordered to cough up a combined £59.3million for unlawfully colluding on prices through cartel agreements when tendering for demolition and asbestos removal work.

Some of the contracts involved the development of Selfridges department store in London, Oxford University, Bow Street Magistrates’ Court and Police Station, and the Old War Office building on Whitehall. 

The Competition and Markets Authority said on Thursday the illegal activity took place between January 2013 and June 2018 across London, the Midlands, and South East England, and concerned public and private sector contracts totalling over £150million.

It said all of the firms had all engaged at least once in ‘cover bidding’, whereby companies tender a contract with an artificially high price or unreasonable terms, with the intention it would not be accepted.

Such collusion can give the impression of a competitive bidding process but gives an unfair advantage to a particular supplier, and often results in poorer quality services and higher prices for customers. 

Five companies were also found by the CMA to have agreed to compensate the ‘losers’ of certain contracts, with £500,000 being paid out on one occasion and some invoices falsified to try and cover up the behaviour.

The sanctions form part of a four-year probe into anti-competitive practices in the construction industry by the CMA, which can fine businesses up to 10 per cent of their turnover if found to have violated the Competition Act.

The 10 groups fined by the regulator were Squibb; Brown and Mason; John F Hunt; Cantillon; McGee; Scudder; Erith; Clifford Devlin; Keltbray, and DSM.

Erith and Keltbray received the highest penalties of £17.57million and £16million, respectively, while Clifford Devlin incurred the smallest penalty of £423,000.

All but two of those punished, Squibb and Erith Contractors, had their levies reduced by the CMA because they admitted last June to their participation in bid rigging.

Erith’s former managing director David Darsey, and Paul Cluskey and Michael Cantillon at Watford-based Cantillon have also been disqualified from being directors for periods of between four-and-a-half years and seven-and-a-half years. 

Michael Grenfell, the CMA’s executive director of enforcement, said: ‘The construction sector is key to our country’s prosperity, so we want to see a competitive marketplace delivering value, innovation, and quality.

‘Today’s significant fines show that the CMA continues to crack down on illegal cartel behaviour.

‘It should serve as a clear warning: the CMA will not tolerate unlawful conduct which weakens competition and keeps prices up at the expense of businesses and taxpayers.’