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Cartels in construction – CMA message for business leaders

Posted by: , Posted on: - Categories: Competition Act 1998 and cartels, Competition law compliance

Construction site

We have fined construction firms £67 million across 5 competition law cases in recent years. This covers a range of construction products and services, including concrete drainage, groundworks, office fit out services, galvanised steel tanks and roofing materials.

As well as large fines for the companies, 11 directors in total were disqualified from acting as directors as a result of these cases, with the most recent being announced in the groundworks and roofing materials cartel cases earlier this year. There have also been 2 criminal convictions, in the galvanised steel tanks and concrete drainage cases.

We’re urging the wider industry to take note to avoid making similar mistakes and are reminding company directors of their responsibility to lead by example and be aware of how their organisation is operating.

See our construction cartel cases to uncover where these businesses went wrong.

Why competition law matters in construction

The construction industry is a major part of the UK economy and is also essential to delivering public services including schools, hospitals, housing, roads and infrastructure.

When businesses illegally collude such as by fixing prices, rigging bids for contracts or agreeing to divide up a market for their own gain, it can lead to a lack of competition and innovation in the industry, resulting in higher prices and less choice for consumers. This can also harm other businesses in the sector who are working hard to innovate and succeed during challenging economic times.

Over a quarter of construction output is from the public sector and central government is the biggest single construction client (see the Government Construction Strategy 2016 to 2020). We are working with procurement officials across government, to make it easier for them, and report suspected illegal activity to us swiftly.

Healthy competition benefits customers, the economy and law-abiding businesses.  It is crucial for construction firms and their directors to be clear on competition rules and abide by them.

Consequences of breaking competition law

Businesses who choose to take part in illegal anti-competitive practices can cause considerable harm, and it is our job at the CMA to crack down on them.

The consequences of breaking the law can be serious, and can include:

  • large fines involved;
  • being disqualified from acting as a director;
  • reputational harm for the business and the industry as a whole;
  • in the most serious criminal cartel cases – prison.

For example, in the concrete drainage case, 2 directors were disqualified for 11 and 12 years – the longest period for director disqualification secured by the CMA to date. Their firm was also fined over £25 million for its part in breaking the law.

These latest disqualifications now bring the total number of all director disqualifications as a result of CMA investigations to 25.

Construction employees

Your responsibility as a company director

Business leaders have a special responsibility to be well informed about what is happening within the companies they govern. If your business does wrong, you are accountable.  

Ignorance is no excuse.

As directors, you set the tone for how your organisation operates.  You need to lead by example and have zero tolerance for illegal behaviour. You should ensure that everyone who works for you is not only clear on competition rules but is under strict instructions to abide by them.

What you need to do now

Being clear on competition rules should be a priority. We have short, sharable advice on our campaign page that we encourage you to read and cascade to staff.

Don’t risk the consequences – check your business practices and come forward if you think you have been involved in, or seen, anything illegal.

How the risk of getting caught is increasing

We often receive cases when a business confesses about their anti-competitive practices.

By being the first to report to us, a business can benefit from our leniency programme and avoid fines, director disqualifications and criminal prosecution, provided it co-operates fully with our investigation.

However, leniency isn’t the only way we uncover wrongdoing. We have strong powers of investigation, including undertaking searches under warrant at both company and domestic premises. In our investigations into galvanised steel tanks and concrete drainage, we used covert recordings to evidence illegal cartel conduct.

Indeed, our intelligence capabilities mean that over half of our cases are intelligence led.

We have streamlined our enforcement processes to take on cases faster, and actively consider director disqualifications in all cartel cases. We have also made it easier for those who want to blow the whistle or report suspect activity to come forward to us.

For more information on reporting on leniency, read our Working with us to tackle cartels blog.

How to report concerns to us

If you’re the first to report a cartel you were involved in, you may be able to get leniency, which means if you co-operate with a CMA investigation, you could receive immunity from fines, criminal prosecution and director disqualification.

For those that have witnessed something illegal, if the information you provide leads to an investigation, you may receive a financial reward.

To find out more, see our Cheating or Competing page.

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