The Competition and Markets Authority ("CMA") has today announced that it has imposed £15m of fines on two UK suppliers of groundworks products. Vp plc and M.G.F. (Trench Construction Systems) Limited were fined £11.2m and £3.7m respectively, for engaging in anti-competitive conduct including sharing confidential information and coordinating on pricing. A third company involved in the case received no fine because it blew the whistle to the CMA, under the 'leniency' scheme that gives immunity from penalties in exchange for reporting anti-competitive arrangements.
Competition law breaches are a consistent theme in the construction sector, with this just the latest in a string of findings of anticompetitive behaviour. The CMA's press release in the groundworks case noted that:
"This is the fourth time in the last 2 years that the CMA has fined a cartel in the construction sector. It is essential that the sector, which is crucial to the success of our country’s economy, can benefit from a competitive marketplace to deliver value, innovation and quality."
Today's announcement follows hot on the heels of £9m fines for two of the UK's largest suppliers of rolled lead, for entering into anticompetitive arrangements including colluding on prices; agreeing not to target certain of each other's customers; agreeing that neither would supply a new business (to avoid upsetting relationships with their existing customers); and exchanging commercially sensitive information.
In 2019 the CMA imposed fines totalling over £36m on FP McCann Limited (fined almost 10% of its annual turnover, the maximum fine the CMA can impose), CPM Group Limited and Stanton Bonna Concrete Limited for engaging in price-fixing, market sharing and the exchange of commercially sensitive information in relation to pre-cast concrete products over a period of almost seven years. Two former CPM directors were disqualified from being company directors, while the former Chief Executive of Stanton Bonna received a two-year suspended prison sentence. FP McCann is appealing the CMA's decision and the level of the fine imposed. That appeal was heard by the Competition Appeal Tribunal in October 2020, alongside a CMA effort to disqualify two FP McCann directors, and judgment is awaited.
Earlier cases saw fines totalling £7m imposed in the office fit-out sector for so-called 'cover bidding' (with six directors disqualified) and £2.6m imposed on water tank suppliers (with one criminal conviction) for a range of breaches. Investigations are ongoing into a not-yet-specified "supply of construction services". These examples emphasise both the serious consequences of breaching competition law and the CMA's persistent focus on the sector.
Construction is a high-risk sector, but awareness is an issue
As noted in our previous updates on competition enforcement in the sector, construction is a very high-risk industry for competition law purposes, with frequent enforcement actions and investigations. The OECD has described the sector as "prone to endemic collusion", and it is a regular target of competition regulators worldwide.
Early in the year, just before the crisis started, the CMA had launched an advertising campaign to remind businesses, with an emphasis on the construction sector, of the line between competing effectively with others and engaging in anti-competitive practices such as price fixing, bid rigging and market sharing.
That campaign was underpinned by CMA research finding that only 6% of UK construction firms were familiar with competition law (and that, perhaps not coincidentally, only 6% had delivered competition law training in the previous 12 months). It also found that 29% of construction sector respondents thought that it was acceptable for competitors to agree prices, 32% that it was ok to agree not to supply each other's customers, and 25% that it was legal to agree who would get which tenders. That is notwithstanding that these are the three most serious forms of competition law breach, each punishable by imprisonment. The CMA will view such numbers as evidence that it should not reduce its focus on the sector.
What should construction firms do?
The COVID-19 pandemic and the associated lockdown measures have had a significant impact on construction. The impact of sites being closed or reduced to essential operations is still being felt throughout the supply chain. In such circumstances, firms will inevitably look to save costs and increase revenues wherever they can, increasing the temptation to take steps that cross the boundaries set by competition law.
Any business that thinks it might have breached competition law should seek legal assistance immediately. If there is an issue then that business should blow the whistle to the CMA, and secure immunity from penalties, before someone else does.
Pro-active compliance strategies, policies and training are key to avoiding illegal conduct, particularly in difficult economic times when employees (even well-meaning ones) can cross the line. Such steps can also help 'flush out' risky activity that has already happened, so the business can investigate and seek leniency ASAP.
We are happy to assist any business looking for help with competition law issues.
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