Contractors intend to take ruling to Competition Appeal Tribunal, as others consider their options
Construction firms including Apollo Property Services and Durkan have vowed to fight fines issued on Tuesday by the Office of Fair Trading following its five-year investigation into cover pricing.
The average fine issued by the OFT for anti-competitive behaviour was £1.13m, or 1.14% of annual global turnover. In total, 103 construction firms were fined £129.5m for cover pricing and bid-rigging. Of these, six were found guilty of the more serious charge of paying rivals to submit a cover price.
Apollo, which was fined £2.2m, said the allegations against it were “wholly unfounded” and it intended to fight the decision in the Competition Appeal Tribunal (see below). Durkan, which was slapped with a £6.7m penalty, said it would be “robustly defending” its position.
Meanwhile, Willmott Dixon (£4.5m), Galliford Try (£8.3m), Kier (£17.9m) and John Sisk (£6.2m) said they were considering their legal options. Others mulling over an appeal include Renew Holdings, RG Carter, Quarmby Construction, Speller Metcalfe, G&J Seddon, Shaylor Construction, Lindum Group, Ballast Nedam and R Durtnell & Sons.
News of possible legal action follows dismay at the size of the fines in some parts of the industry.
Stephen Ratcliffe, director of the UK Construction Group, condemned the penalties as unfair and badly timed. He said: “The industry is going through its sharpest downturn on record with huge falls in demand, employment and profits. These punitive fines will be hard to absorb and will cost jobs.”
Adam Aldred, a partner at law firm Addleshaw Goddard, said legal challenges could be taken to the European Court of Justice.
He said: “This case certainly has legs. Previous legal rulings have all been essentially about bid-rigging where people all got together to arrange prices. Here we have situations where not all the tenderers are involved.
“The question you have to ask is: what was the anti-competitive intent of these firms? I can see this going to the European Court of Justice.”
Another lawyer said he would advise anyone fined more than 0.5% of turnover to seriously consider a challenge.
What happens next?
All 103 of the contractors affected by the Office of Fair Trading’s decision have been sent a disc setting out the full details of the inquiry.
They have two months to decide whether or not to appeal against the findings. Any challenge has to be launched through the Competition Appeal Tribunal. This is the body designated to review decisions made by the OFT and the Competition Commission. Cases will be heard before a panel of three High Court judges and senior lawyers.
The OFT will publish the full details of its investigations in eight weeks, once the firms have had a chance to request commercially sensitive information to be redacted.
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The 20 biggest fines – and how much they hurt
Although Kier’s £18m was the highest fine issued, it is Durkan, which was found to have engaged in paying and receiving compensation payouts to other firms, that has come off the worst, losing nearly 5% of its annual contracting turnover to the OFT. The fine has eaten up six years’ worth of profits at 2007 levels. John Sisk has fared little better, with 2.7% of turnover heading to the tax coffers, consuming three years’ profits.
Meanwhile, Balfour Beatty fared well, despite subsidiary Mansell being found guilty of making compensation payments. It received a fine of 0.06% of its contracting turnover, though that includes a 50% leniency. Carillion’s £5.4m fine is less that 0.2% of turnover, with a leniency of 45%.
Of the 20 firms that were fined the most, Bowmer & Kirkland, Durkan and Mansell (Balfour Beatty) paid and received compensation payments. But while Durkan was hit hard, Bowmer & Kirkland was fined 0.8% of turnover (the average was 1.14%) and an unexceptional 17.6% of profit.