CMA Warns Construction on Breaking Competition Law

THE COMPETITION AND MARKETS Authority (CMA) has issued a warning to construction firms over price fixing, bid rigging and dividing markets following a number of high-profile cases.

New research, conducted on behalf of the CMA, revealed that only 6% of firms in this sector were familiar with competition law and that general understanding of illegal business practices is low.

A third of those surveyed thought it was legal to attend meetings with competitors to agree prices. A further third thought agreeing not to supply each other’s customers was legal, and a quarter  saw no problem with discussing bids and agreeing who would get which tenders.

The research goes on to show 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.

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.”

Pre-cast concrete investigation

An investigation into a pre-cast concrete drainage cartel that resulted in £36m in fines in 2019, revealed that the businesses concerned 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, to 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.”

Wider campaign

The warning comes as part of a social media, radio and digital display campaign titled ‘Cheating or competing?’ to raise awareness of cartel behaviour.

Charlotte Valeur, Chair of the Institute of Directors

Charlotte Valeur, Chair of the Institute of Directors, said:  “Competitive markets are good for both consumers and businesses, encouraging innovation and keeping prices down, so it’s worrying that the CMA have found that many businesses leaders don’t know their full legal responsibilities. Firms should prioritise director training and professional development to ensure they do not inadvertently fall foul of the law.”

Federation of Small Businesses National Chair Mike Cherry said:  “This awareness campaign from the CMA is so important.

Mike Cherry, National Chairman, Federation of Small Businesses

“Greater awareness is needed for all businesses about these practises, some of which could be ruinous for small businesses.

“SMEs want to do the right thing, which is why it is so important to have a clear understanding of the law surrounding, anti-competitive behaviours such as cartels and price fixing.

“FSB’s own research has found that such practices could have a serious impact on competition as well as issues involving diversity and creating a more complex business environment.”