Appeals Result in OFT Fine Reductions for Construction Companies

by Reed Smith
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Following the first batch of appeals against the Office of Fair Trading's (OFT) decisions in the construction cover pricing case, the Competition Appeal Tribunal (CAT) has reduced the fines for all 13 companies.

On 11 March 2011, the CAT handed down a judgment covering the appeals by Kier, Ballast Nedam, Bowmer and Kirkland, Corringway, Thomas Vale, and Sicon. The CAT found that the total fines imposed by the OFT were excessive given the nature of the infringement. The CAT substantially reduced the total fines imposed on each of the appellants from a combined total of around £42 million to £4.4 million.

Subsequently, on 22 March, the CAT handed down a judgment on an appeal by Durkan on both liability and penalty. The CAT concluded that the OFT had been correct to attribute liability for two infringements, although the OFT had not established to the requisite standard for one infringement. The total fine imposed on Durkan was therefore reduced from £6,720,551 to £2,436,000.

On 24 March, the CAT reduced the fines imposed against a further six undertakings (Tomlinson, Sol, Seddon, Interclass, Apollo and Galliford Try) from around £15.5 million to £4.2 million.

The OFT previously concluded that between 2000 and 2006, construction companies had breached the Chapter I prohibition of the Competition Act 1998 by "cover pricing". This is the process of companies submitting bids for construction contracts that they did not intend to win in order to create a misleading impression of a competitive bidding process. This was referred to as "simple cover pricing". Some companies also created agreements to pay compensation to competing bidders in addition to the cover pricing. The OFT fines totalled £129.2 million for 103 construction companies as a result of the OFT's largest-ever investigation.

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