Firms caught up in the cover pricing investigation face rapidly rising legal costs

The Office of Fair Trading’s strategy of pursuing high-profile cases against construction firms is certainly paying dividends – to lawyers, that is. Our learned friends are estimated to have pocketed as much as £5.6m from the industry since the OFT inquiry began three years ago, writes Michael Glackin.

That figure does not yet include the billable hours spent trawling through the OFT’s 1,755-page statement of objection that 112 firms received last month.

One contractor said: “Every time a lawyer writes a letter it costs £500. It makes you wonder why we’re the ones being investigated.”

Rudi Klein, a lawyer and chief executive of the Specialist Engineering Contractors group, said: “Competition lawyers are rubbing their hands with glee at the moment. If you have a meeting with a decent one you’re looking at £300 an hour. If you want to see a partner at a firm it’ll be £500.”

A straw poll of companies named by the OFT revealed that firms have each paid about £50,000 to lawyers over the past three years. But, as Klein said: “The £50,000 just covers a lawyer appraising a firm of its situation and rights.” The real expense will come once the OFT has made a decision and fined those it deems to have broken the rules.

Every time a lawyer writes a letter it costs £500. It makes you wonder why we’re the ones being investigated.

A contractor

A lawyer with experience of OFT operations said: “Competition lawyers and barristers aren’t cheap. If you are going to appeal all the findings against you, you’re looking at £500,000 for starters, but a firm may be facing a fine of, say, £15m, so it may be worthwhile.”

Then there’s the issue of in-house resources. Regarding the amount of management time devoted to dealing with the impact, another contractor added: “On top of the lawyer’s fees, which are around £50,000 so far, I would say at least one of our directors has spent around a week in each month dealing with the impact. In addition to dealing with solicitors, we’ve had to communicate with clients explaining exactly what's going on, and we’ve also had to do additional marketing of the company.”

And that’s not the half of it. Cohen, Milstein, Hausfeld & Toll, an American class-action law firm, is offering to act for clients on a no-win, no-fee basis. It is trawling through public procurement records in anticipation of a court appearance next year.

The cost of defending against this could make the amount spent on lawyers so far look modest.

The lawyer with OFT experience said: “Quantifying damages in something like bid rigging wouldn’t be straight forward, but the opportunity for clients to sue and get recompense is there and it could affect any of the firms that end up on the wrong side of the decision. This whole episode is going to be an expensive one for all the construction firms involved.”