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Office of Fair Trading officials anticipate 鈥渟ignificant enforcement action in parts of the UK construction sector鈥� in the coming months and years. This is likely to result not only in fines but also in individual directors and employees being prosecuted for criminal offences and facing imprisonment for up to five years. One possible criminal case has been passed to the Serious Fraud Office to consider for prosecution.

After imposing fines totalling just over 拢856,000 for relatively minor price-fixing and bid-rigging agreements in the flat roofing

sector, the OFT is now pointing to the much higher-profile experience of the Dutch competition authorities, which recently imposed fines of more than *100m (拢70m) on companies that took part in a cartel that affected contracts such as a high-speed rail link. In the UK the break-up of the flat-roofing cartels has started a chain reaction across the sector: the OFT says it has been given dozens of leads from companies seeking to avoid being fined by turning whistleblower. It expects more to follow suit.

One company participated in all three roofing cartels. It did not pay any fines because it was the first to inform the OFT that they existed. Another company received a 50% reduction in its fine because it also owned up. It then received a further 5% reduction because it told the OFT of another cartel of which the OFT was unaware. That company can expect a full reduction in fines for participating in that other cartel when the OFT makes its decision in that case.

The OFT鈥檚 leniency regime actively encourages whistleblowing and 鈥減risoner鈥檚 dilemma鈥� type decisions. Businesses have an incentive to come forward as soon as possible. Only the first through the door can receive a 100% reduction in fines. Whistleblowers may be a fellow cartel member, a customer that has voiced its suspicions to the OFT or even a disgruntled former, or current, employee. The snowball effect should not be underestimated, neither should the policy.

An application for leniency has other attractions apart from a reduction in fines. A director of a company that commits any UK or EU competition law infringement is potentially liable to be disqualified from being a director, or involved in the management of a company, for up to 15 years. A successful application for leniency will result in the OFT agreeing not to bring disqualification proceedings.

A greater deterrent, perhaps, is that cartel offences such as bid-rigging, price fixing and market sharing are criminal offences under the Enterprise Act and directors and senior managers can be imprisoned for up to five years. Being the first to tell the OFT of a cartel will generally mean criminal proceedings will not be initiated.

You therefore need to make sure that you are competition compliant or, if you are not, that you know how to reduce the downside risk.

First, bear in mind that some established practices are now prohibited. In the West Midlands roofing case, cover bids were considered. These are bids giving the appearance of genuine competition but where the competitors have agreed to submit high bids or bids with onerous terms to ensure they are not selected. The argument that a cover bid was necessary to ensure that the bidder remained on the bidding list in the future was rejected. Bid suppression, bid rotation, market sharing and price fixing are all prohibited. It is also irrelevant whether a contractor is eventually appointed.

Planning is vital. If you know you are infringing, you need to work urgently with your lawyers to assess whether to apply for leniency. The advice from the OFT head of cartel investigations is 鈥減ick up the phone and talk to me before we visit you鈥�.

If you are unsure whether your company is competition compliant, you need to work with your lawyers to establish an effective competition compliance audit.

An effective, top-down, compliance programme is a key element of the audit. This should be aimed at ensuring that procedures are in place to make sure the competition rules are not infringed and should include a plan on handling on-site investigations 鈥� also know as dawn raids. And investigators are accompanied by IT specialists, who can retrieve those emails you thought you had permanently deleted 鈥�

Martin Baker is a competition partner at Taylor Wessing, m.baker@taylorwessing.com