Firms told to expect fines running into millions of pounds
Demolition firms have been told to expect penalties running into tens of millions of pounds by the end of the year after the Competition and Markets Authority released its provisional findings into bid rigging by 10 companies following a years-long probe.
The CMA said its investigation, begun in March 2019, had found the firms had illegally colluded to rig bids for demolition and asbestos removal contracts worth over 拢150m.
鈥淭he bids were rigged by one or more construction firms which agreed to submit bids that were deliberately priced to lose the tender [known as cover pricing],鈥� it added.
And it said that several received 鈥榗ompensation payments鈥� for deliberately losing bids with, in one case, a payment being made that totalled more than 拢500,000.
Among the companies caught up in the probe covering a five and a half year period up to June 2018 are McGee, Careys-owned Scudder, which dropped its name last year, Keltbray and John F Hunt. Also under the spotlight are Brown and Mason, Cantillon, Clifford Devlin and DSM.
The cartel-buster added these eight have admitted participation but two others 鈥� Erith and Squibb 鈥� have not admitted wrongdoing and will be contesting the provisional findings.
The CMA said McGee and Scudder 鈥渞eported their involvement in the conduct under the CMA鈥檚 leniency policy and will benefit from a discount on any fine鈥�.
It added 鈥淭he findings are provisional and it should not be assumed that any company has broken the law at this stage.鈥�
In all, the CMA said 19 jobs were hit by bid-rigging including the Old War Office in London, the redevelopment of Bow Street Magistrates Court, the Metropolitan Police training centre in north London, redevelopment work at Selfridges on Oxford Street, redevelopment work for Oxford University, shopping centres in Reading and Taplow, a new building for the LSE at Lincoln鈥檚 Inn Fields and the refurbishment of a City office building at 135 Bishopsgate.
And it said that seven of the 10 were at least once involved 鈥渋n arrangements by which the designated 鈥榣osers鈥� of the contracts were set to be compensated by the winner. The value of this compensation varied but was higher than 拢500,000 in one instance. Some firms produced false invoices in an attempt to hide this part of the illegal behaviour.鈥�
It said Erith and Squibb were also contesting this finding, with John F Hunt, Clifford Devlin and Keltbray the three firms found not to have participated in making or receiving these payments.
The CMA鈥檚 senior director of cartels Juliette Enser told 好色先生TV that Erith and Squibb now had the chance to make 鈥榬epresentations鈥� to its case decision group which will decide on their merit in the coming months. 鈥淧arties who wish to challenge can also do so through the courts,鈥� she added.
An announcement on Erith鈥檚 and Squibb鈥檚 fate is expected in November with the amount that firms will be told to pay in fines also due to be disclosed at the same time.
The CMA has carried out five investigations into the construction industry in recent years which have seen a cumulative 拢60m handed out in penalties.
Enser said she hoped 鈥渢he size of the penalties we鈥檝e been applying will have the required deterrent effect鈥�.
She declined to put a number on how much the 10 demolition firms can expect to face in fines, or whether directors will face disqualification, but conceded penalties are likely to run into many millions of pounds.
In their latest report and accounts, Careys said it had set aside a 拢9m provision for 鈥渁 regulatory matter鈥� while last week Keltbray said it was making a 拢6m provision for the same reason.
Enser, who led the investigation and has been at the CMA and its predecessor the Office of Fair Trading for more than a decade, said: 鈥淚t鈥檚 a big investigation. This kind of conduct is very serious. Given construction is a hugely important industry, it鈥檚 important that where there is lingering poor practice, we stamp it out.鈥�
What demolition firms have said
Keltbray
鈥淜别濒迟产谤补测 strongly condemns anti-competitive practices and, having co-operated fully and formally settled its case with the CMA, acknowledges the findings relating to isolated activities of a previous management team in a subsidiary business.
鈥淎s the CMA investigation has confirmed, Keltbray Limited did not benefit from the award of any contracts nor received any compensation payments arising from this infringement activity.
Since 2019 Keltbray has transformed its organisational structure and corporate governance framework and has assured all stakeholders that these historic practices will not occur in the future.鈥�
Brown and Mason
鈥�Brown and Mason continues to cooperate fully with the CMA鈥檚 investigation into allegations of anticompetitive behaviour in the UK demolition sector.
鈥淚n order to draw a line under this, Brown and Mason have agreed to settle in relation to two historic, unconnected and isolated instances that took place under previous management nearly a decade ago. No customers were adversely affected by Brown and Mason鈥檚 conduct and we remain committed to delivering the highest possible level of technical, commercial and ethical service to our customers.
鈥淐ompetition law compliance is at the core of our business, with our new, progressive management team having taken extensive and appropriate steps to reinforce our competition law compliance measures.鈥�
John F Hunt
鈥�John F Hunt acknowledges and accepts the findings of the CMA investigation which has provisionally found that John F Hunt was involved in breaches of competition law in relation to a small number of historic and unrelated bids.
鈥淲e note the CMA鈥檚 acknowledgement that John F Hunt was not involved in any compensation arrangements relating to those bids. John F Hunt also did not benefit from the award of any of the relevant contracts.
鈥淭he Group has fully cooperated with the CMA鈥檚 investigation and is fully committed to compliance with competition law. We have strengthened our competition law compliance measures and do not condone any activity which limits or restricts competition in the market.鈥�
McGee
鈥�McGee acknowledges historic Competition Act infringements as announced by the CMA. These infringements took place under the previous ownership and leadership structure.
鈥淭hroughout the period of the investigation, McGee has co-operated fully with the CMA. Having reached a final settlement position, McGee has certainty over the quantum of its fine and has made full provision in its previous audited financial statements. Accordingly, there will be no further financial impact on McGee arising from the investigation.鈥�
Cantillon
鈥淭oday the Competition and Markets Authority (CMA) announced the findings of its investigation into anti-competitive behaviour during the period of 2009-2019. This found that Cantillon was one of a number of demolition companies that engaged in this behaviour, with instances from 2013-2017. We have worked closely with the CMA on this civil investigation by cooperating fully, and do not dispute the findings.
鈥淐antillon has a proud record stretching back over 50 years. This culture informed our decision to proactively end these practices back in 2017 and reform our internal governance and cultural approach to prevent them from reoccurring. The Cantillon of 2022 is a very different business to that of 2017. We have accepted the fine and apologise to our customers and stakeholders for our previous lapse in standards.鈥�
TE Scudder/Careys
鈥淭oday, the Competition and Markets Authority (CMA) published a press release regarding investigations into suspected anti-competitive arrangements in the supply of demolition construction services in Great Britain.
鈥淭.E. Scudder Limited has been listed as an involved party and as a leniency applicant. In line with the CMA鈥檚 usual practice, it has automatically held T.E Scudder Limited鈥檚 parent companies, P.J. Carey Plant Hire (Oval) Limited and Carey Group Limited liable as well. We want to take this opportunity to sincerely apologise for the actions that resulted in this investigation. The behaviours that were exhibited were not acceptable and are certainly not in line with our values.鈥�
Squibb
鈥淓arlier today the Competition and Markets Authority (the 鈥淐MA鈥�) has, after investigating suspected historical anti-competitive behaviour in the provision of demolition and related services between January 2013 and June 2018, announced that it has provisionally found that ten firms illegally colluded to rig bids for demolition and asbestos removal contracts.
鈥淓ight of the ten firms have admitted their involvement in at least one instance of bid rigging. Squibb Group Limited has not admitted its involvement and the CMA notes in its announcement that it should not be assumed that Squibb Group Limited has broken the law.
鈥淪quibb Group Limited will continue to engage with the CMA regarding its assessment of the facts relating to Squibb and the market for demolition services. In accordance with the process, the CMA is required to consider Squibb鈥檚 representations before finalising its decision. We have a high degree of confidence that the CMA will take Squibb鈥檚 submissions/concerns seriously. Further updates are expected later in 2022.鈥�
Erith, DSM and Clifford Devlin have all been contacted for comment
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