We see cheating in construction, even if you can’t
The CMA is here to ensure that construction businesses comply with competition law.
Who are we?
The Competition and Markets Authority (CMA) enforces competition law and puts a stop to business cheats who behave anti-competitively.
What’s our aim?
The CMA is calling for everyone in business to understand their responsibilities when dealing with rivals. Or risk the consequences.
Businesses that collude with their competitors are cheating consumers and other businesses by inflating prices, reducing choice, and eroding trust in markets. When rivals collude like this, they are acting as a business cartel.
A business cartel is when rival businesses agree to act together, instead of competing with each other. This kind of arrangement is a form of cheating that is designed to benefit cartel members, while maintaining the illusion of competition.
Cartels can be local, national or international. Specific examples of a cartel’s business practices include price fixing, bid rigging and market sharing.
Price fixing in the construction industry
In 2019, three pre-cast drainage product companies were found to have entered into illegal arrangements under which they discussed and agreed certain price lists, shared out the market by allocating customers, and exchanged competitively sensitive information.
Specifically, the businesses discussed and agreed their spot market price lists, where prices are agreed on a deal-by-deal basis. These were then used by sales teams as a basis for negotiating with customers – in effect, the agreed list prices acted as ‘targets’. The companies manufactured pre-cast concrete drainage products, which are essential for roads and railways and used in large infrastructure projects.
The cartel began in 2006, after a period of fierce competition and low prices in response to tough market conditions. The rivals met to end this situation to create what one of them described as a “new era of trust”, and held regular cartel meetings, four of which were recorded by the CMA. The meetings took place in secret, in hotel meeting rooms away from business premises.
The CMA used its civil and criminal enforcement powers to investigate both the businesses and individuals involved. As a result of the CMA’s civil investigation, the companies were fined £36m. Two of the companies admitted breaking the law and accepted the penalties that were imposed on them. One is appealing both the CMA’s findings and the penalty. The CMA is defending the case.
Two directors were also disqualified for six-and-a-half and seven-and-a-half years respectively, with additional disqualification cases pending in court. As a result of the CMA’s criminal investigation, one individual was convicted of the criminal cartel offence. He was sentenced to two years’ imprisonment (suspended for two years) and disqualified from acting as a company director for seven years.
There can be severe consequences for individuals and businesses involved in cartels. Businesses may be fined up to 10% of their worldwide turnover and directors can be disqualified for up to 15 years.
There is also the risk of reputational harm and being pursued for damages by other businesses or customers. On a personal level, individuals can be fined and even sent to prison for up to five years.
Why apply for leniency
If you’ve been involved in a cartel and you’re the first to report it to us, cooperate with our investigation and meet certain conditions, you could receive immunity from fines, and immunity from criminal prosecution and director disqualification.
Even after an investigation has started, some businesses may still benefit from reduced fines and escape director disqualification if they meet certain conditions under our leniency programme. To apply for leniency, call us on 020 3738 6833.
If you think you’ve broken the law, we always recommend that you seek independent legal advice.
The reporting process
If you’ve witnessed an illegal business cartel, please do the right thing by reporting it to us. Call 020 3738 6888, fill in the online reporting form on our website by searching ‘cheating or competing’, or email: [email protected]. If the information you provide leads to an investigation, you may well earn a reward.