(by Andreas Stephan) In just over a week, the Office of Fair Trading has imposed £130m in fines on 103 construction companies for bid-rigging and cover pricing, and £40m on six recruitment firms supplying the construction industry, for price-fixing and a collective boycott of an intermediary firm. Many are asking, why is the OFT flexing its muscles now?
Competition law cases of this nature are very time consuming and pose a significant drain on the regulator’s limited resources. The fact that cartel cases are few and, generally, far between, is also a reflection of the difficulties in finding such anti-competitive agreements, rather than the OFT arbitrarily targeting an industry.
The decision to impose fines a week apart may simply be a coincidence, or may be a deliberate strategy on the part of the OFT to maintain the momentum of publicity created by the construction industry fines, and keep the subject of anti-competitive conduct in the headlines.
For every instance of anti-competitive conduct caught and fined by the OFT, there will be countless others that are skilfully kept secret or which are considered too minor to warrant a full investigation.
However, don’t pick up the phone to your competitors just yet.
What these two cases show is the importance of tip-offs from those suspecting foul play and the OFT’s own leniency programme. The investigation into the construction industry was triggered by an eagle-eyed auditor at Nottingham University Hospital NHS Trust.
In the recruitment companies’ case, Beresford Blake Thomas and Hill McGlynn (now a single company) blew the whistle on what was going on.
The OFT’s leniency programme provides immunity for the first firm to come forward, and as OFT activity and popular understanding of anti-competitive conduct increases, these sorts of tip-offs may become more common.
Handsome discounts on fines also await those willing to co-operate, once the immunity prize has gone.
Without the firms’ co-operation fines in the recruitments case would have been £173m.
Those thinking about breaking competition rules therefore have to ask themselves, “can I really hide this from my customers?” and “can I really trust my competitors not to rat on me?”.
Research undertaken at the University of East Anglia’s ESRC Centre for Competition Policy, finds a domino effect.
If one cartel is uncovered, this prompts numerous complaints and leniency applications from customers and firms potentially losing from and involved in, parallel infringements of competition law.
Those who feel the OFT is anti-business should pay close attention to the nature of conduct in these two cases, as it was other businesses who are largely alleged to have paid over the odds as a result of the anti-competitive conduct.
In the recruitment firms’ case, the incumbent firms attempted to drive Parc UK out of the market; a firm with a new and innovative business model which was designed to secure better deals for construction companies seeking new staff.
(This article was published in the Eastern Daily Press on 02 October 2009)