Following an investigation by the Competition and Markets Authority (CMA), 10 UK-based construction firms have been fined £59,334,957 for colluding on prices through illegal cartel agreements when submitting bids in competitive tenders for contracts.
These bids were rigged, deceiving the customer that they were competitive when that was not the case. Each of the 10 firms was involved in at least one instance of bid rigging between January 2013 and June 2018. The fines for each are: Brown and Mason (£2,400,000), Cantillon (£1,920,000), Clifford Devlin (£423,615), DSM (£1,400,000), Erith (£17,568,800), JF Hunt (£5,600,000), Keltbray (£16,000,000), McGee (£3,766,278), Scudder (£8,256,264) and Squibb (£2,000,000).
Brown and Mason, Cantillon, Clifford Devlin, DSM, John F Hunt, Keltbray, McGee and Scudder were handed reduced fines as settling parties who had, as announced in June last year, admitted their involvement in the cartel activity.
The CMA has secured the disqualification of three directors of companies involved in the unlawful conduct. These are Mr David Darsey (formerly a director of Erith) for a period of five years and 10 months from 2 February 2023, Mr Michael Cantillon (formerly a director of Cantillon) for 7 years and 6 months and Paul Cluskey (current director of Cantillon) for four years and six months. Each of these directors has benefited from reduced disqualification periods, having voluntarily agreed to the disqualification by way of undertakings to the CMA.
The bids were rigged by one or more of the construction firms agreeing to submit bids that were deliberately priced to lose the tender. This practice, known as ‘cover bidding’, can result in customers paying higher prices or receiving lower quality services.
In addition, the CMA found that five of the firms, on at least one occasion each, were involved in arrangements by which the designated ‘losers’ of the contracts were set to be compensated by the winner. The value of this compensation varied but was higher than £500,000 in one instance. Some firms produced false invoices to hide this part of the illegal behaviour.
The CMA found that the instances of illegal collusion took place over a five-year period and affected 19 contracts for demolition work in London, the Southeast, and the Midlands. The public and private sector contracts impacted included the development of Bow Street Magistrates Court and Police station, the Metropolitan Police training centre in Hendon, Selfridges (London), properties belonging to Oxford and Coventry Universities, shopping centres in Reading and Taplow, a large office block on London’s Southbank and other sites in central London. Not all the firms were involved in colluding in each of these contracts, and not every contractor who submitted a bid for these contracts was involved in the illegal collusion.
Michael Grenfell, the CMA’s Executive Director for Enforcement, said: "The construction sector is key to our country’s prosperity, so we want to see a competitive marketplace delivering value, innovation, and quality.
"Today’s significant fines show that the CMA continues to crack down on illegal cartel behaviour. It should serve as a clear warning: the CMA will not tolerate unlawful conduct which weakens competition and keeps prices up at the expense of businesses and taxpayers.
"We have also secured the disqualification of certain company directors involved. Company directors must understand that they have personal responsibility for ensuring that their companies comply with competition law, and that disqualification may follow if they fail to do so."
The CMA’s decision follows a complex and large-scale investigation, opened in 2019. The CMA conducted unannounced inspections of 15 business premises, interviewed 35 people, served over 120 notices requiring the provision of information or documents and undertook a detailed review of emails, mobile phone communications and financial records relating to the parties.