The UK’s competition watchdog found that several cartels involving 10 construction suppliers conspired to bid for contracts worth £150m and defraud clients including Selfridges and Oxford University.
Friday, Competition and Markets Authority Said it was temporarily found that the companies were complicit in contract bidding for demolition and asbestos removal projects.
The three-year investigation is part of the CMA’s broader crackdown on anti-competitive behaviour in the construction industry, resulting in multi-million pound fines and the disqualification of 11 directors.
The CMA has the power to impose fines of up to 10% of turnover on companies that violate the Competition Act. It can also pursue criminal cases of cartel crimes and take individuals to court, potentially imposing prison terms on those convicted.
Friday’s update was related to the civil investigation. Eight construction groups, including Brown and Mason Group, Cantillon and Keltbray, admitted to being involved in at least one “bid rigging” incident, according to the regulator.
Erith and Squibb, two of the UK’s largest private construction groups, have yet to acknowledge their involvement and will now have the opportunity to respond to the CMA’s provisional findings.
Keltbray said it “strongly condemns anti-competitive conduct”, noting that the findings were related to “isolated activities related to the subsidiary’s former management team”.
The company said it had “transformed its organizational structure and corporate governance framework . . . these historic practices will not happen in the future”.
Brown and Mason said it would continue to cooperate fully with the CMA’s investigation into allegations of anti-competitive behaviour in the UK demolition industry.
It said: “No customers were adversely affected [our] We remain committed to providing our clients with the highest possible level of technical, commercial and ethical service. “
Cantillon declined to comment. Bristol-Myers Squibb has been contacted for comment.
The CMA said the scam involved 19 demolition work contracts in London and the Midlands; however, not all ten companies were complicit.
These projects include the development of Bow Street Magistrates Court and Police Station, the Metropolitan Police Training Centre, Selfridges Department Store, Oxford University and shopping centres in Reading and Taplow.
The CMA said one or more of these groups participated in bids designed to fail, allowing pre-agreed suppliers to win, a practice known as “cover bids”. In one case, the contract winner agreed to pay the loser an amount in excess of £500,000.
Armando Castro, Associate Professor at the Bartlett School of Sustainable Architecture at UCL, said:
“Construction companies are prone to cartels because with limited land, resources or expertise, they behave almost like monopolies – as in this example, asbestos poses a health risk”.
Prosecution may be difficult to prove, he added, “because of the fine line between competitors meeting in open and transparent environments such as trade bodies or those coordinating price fixing”.
“That’s why we need a strong CMA,” he said.
Michael Grenfell, executive director of enforcement at the CMA, said: “Bid rigging can lead to worse deals, which can leave businesses — and sometimes taxpayers — out of pocket.”