Third of construction firms think agreeing prices is acceptable

Nearly a third (29%) of construction companies think it is ok to meet up with competitors to agree prices.

That’s one of the findings from a new survey by the Competition and Markets Authority (CMA), which has launched a new digital and radio campaign to ask construction companies if they are “cheating or competing”.

• Competition watchdog fines precast firms £36m

The CMA issued £43m in fines last year and said it had noted that a number of recent cases involving anti-competitive practices like price fixing, bid rigging and dividing markets or customers between competitors had come from the construction industry.

The research, which involved surveying 400 people from the sector, also found that only 6% of companies were familiar with competition law and that the general understanding of the illegality of these business practices was “low”.

A further 32% thought agreeing not to supply each other’s customers was legal, and a quarter (25%) saw no problem with discussing bids and agreeing who would get which tenders.

And it found that only 6% of management teams of the construction firms surveyed had received competition law training. Additionally, only 6% of the respondents had actively sought out information on how to comply with the law.

Precast cartel recorded

The news came as the CMA released details of conversations between companies recorded during its investigation into a pre-cast concrete drainage cartel. The CMA found that the companies involved held regular secret meetings (four of which were secretly recorded by the CMA), away from business premises, in hotel meeting rooms. 

The businesses discussed and agreed certain price lists, which were then used by sales teams as a basis for negotiating with customers. They also agreed that they would not compete for each other’s customers on certain fixed price contracts. One of the individuals at a cartel meeting said: “I’m quite happy if we agree jobs, because you know, it is pointless cutting the bloody price, we should be sticking out, as we’ve always said, get a better price.”

And another said: “Just set the term deals up, set the…market rates up and the merchants rates up…and the likelihood is you’re going to get the same market share…”

The Northern Ireland-based firm FP McCann Ltd is facing a fine of more than £25m for its part in the scheme. Derbyshire-based Stanton Bonna Concrete and Somerset-based CPM Group will have to pay more than £7m and £4m respectively. FP McCann is appealing the CMA’s decision in relation both to its findings and the amount of the penalty. The CMA is defending the appeal.

Howard Cartlidge, the CMA’s senior director of cartels, said: “The CMA is cracking down on businesses that collude to rip off customers by fixing prices, sharing out markets amongst themselves or rigging bids. Our message to them is that we know cheating when we see it, even if you don’t. Pleading ignorance is no defence; it’s up to businesses to know what these unfair practices look like and avoid them.

“By ensuring you stay on the right side of the law, you can avoid substantial fines, director disqualification or jail. And if you suspect something illegal is going on, report it to us before it’s too late.”

Businesses found to have been involved in illegal cartels can be fined up to 10% of their annual turnover, while individuals can face up to five years in prison and directors can be disqualified from holding director positions for up to 15 years. The CMA added that these penalties can be reduced or eliminated altogether where a business or individual report their involvement in a cartel and co-operate via its leniency programme.