Competition Act 1998 Decision of the Office of Fair Trading No. CA98/02/2009 Bid rigging in the ...

1945 Pages·2009·10.73 MB·English

Competition Act 1998
Decision of the Office of Fair Trading
No. CA98/02/2009
Bid rigging in the construction industry in England
21 September 2009
(Case CE/4327-04)

Confidential information in the original version of this Decision has been redacted
from the published version on the public register. Redacted confidential
information in the text of the published version of the Decision is denoted by
[…][C].
COMPETITION ACT 1998

DECISION

Case CE/4327-04

Bid rigging in the construction industry in England

21 September 2009
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CONTENTS

A brief description of the contents of each section of this document.

Capitalised terms used in this Contents section are defined in the Glossary at pages 28
to 29 below.

Purpose of this Contents section

(i) This Contents section is intended to assist readers with understanding the
structure and purpose of this Decision. A more detailed Index follows.

Section I – Introduction

(ii) The Introduction lists the Parties to the Infringements of the Chapter I
prohibition of the Act which form the subject of this Decision. Some Parties
comprise more than one legal person, i.e. the Participant Company, together
with its ultimate parent company at the time of each Infringement, where
relevant.

Section II – Factual Background

(iii) The first part of the Factual Background section, II.A The Parties, describes
each of the Parties’ primary activities and corporate structure. It lists details of
the Parties’ turnover and directors for each of the relevant years, and sets out
the OFT’s analysis of undertakings comprising more than one legal person,
where relevant. The Parties’ representations in relation to these matters are also
addressed here.

(iv) The second part of this section, II.B The OFT’s Investigation, provides details of
the investigation carried out by the OFT in this case, including dates of
inspections and searches, interviews and written requests for information, and
the Statement and Supplementary Statements. This part also lists the leniency
Parties and describes the OFT’s Fast Track Offer made to the non-leniency
Parties. It also describes the process by which the OFT selected the Alleged
Infringements included in the Statement from information received in relation to
the Suspect Tenders, and sets out the OFT’s decision not to pursue certain
Alleged Infringements following the issue of the Statement and receipt of the
Parties’ representations.

(v) This part also describes the circumstances in which leniency Parties will receive
full immunity for Infringements, when a reduction in penalty will be available,
and in general terms the number of penalties each leniency Party and non
leniency Party will face.

(vi) Representations from the Parties on possible alternative remedies, the nature,
length and conduct of the OFT’s investigation, the leniency process and the
Fast Track Offer are also addressed in this part.

(vii) The third part of the Factual Background section, II.C Definition of Relevant
Markets, sets out the OFT’s definition of the relevant product markets and
relevant geographic markets within which each of the Infringements is
considered by the OFT to have occurred, and which form the basis of the
starting point for the OFT’s calculation of the penalty in respect of each of
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those Infringements. The Parties’ representations on market definition are also
addressed here.

Section III – Legal Background

(viii) This section sets out the legal framework against which each of the
Infringements has been considered by the OFT. It includes, but is not restricted
to, a description of the law relating to undertakings, price fixing and bid rigging
activities including cover pricing and compensation payments. This section also
addresses the Parties’ representations on the legal background to this Decision.

Section IV – The Conduct of the Parties

(ix) This section describes the Infringements that form the subject of this Decision,
namely, bid rigging activities in the construction industry in England between
the coming into force of the Act on 1 March 2000, and December 2006. The
majority of the bid rigging activities discovered by the OFT involved cover
pricing, which occurs when a company obtains a price from a competitor in the
tender process which is not designed to win the contract but is intended to give
the appearance of competition. In addition the OFT found a number of instances
of payments made between bidders, commonly referred to as ‘compensation
payments’.

(x) The first part of this section, IV.B General comments on cover pricing and other
bid rigging activities in the construction industry in England, sets out certain
common themes that emerged in the course of the OFT’s investigation,
concerning the way in which construction companies conducted the practice of
cover pricing and other bid rigging activities during the period under
investigation. Many of the Parties in this case have testified to the endemic
nature of the practice. The widespread and endemic practice of cover pricing in
the construction industry was carried out in a relatively standard way, and the
comments in this section should be read as applying to all Parties and all of the
Infringements that are described in the following sections, except as specifically
otherwise stated in the descriptions of the Infringements. The Parties’
representations in relation to these matters are also addressed in this part.

(xi) In order to avoid extensive repetition, the OFT sets out in the second part of
this section, IV.C Leniency Parties’ Approach to Cover Pricing and other Bid
Rigging Activities, evidence on the way in which each of the leniency Parties
engaged in cover pricing and other bid rigging activities, that is common to all
of the Infringements in which each leniency Party has been found to have
participated. The Parties’ representations in relation to this evidence are also
addressed here. The information on each leniency Party is described in
alphabetical order.

(xii) The third part of this section, IV.D The Infringements, sets out the specific
evidence, and the inferences and conclusions drawn by the OFT from that
evidence, in respect of each of the 199 specific Infringements in which the OFT
has concluded that the Parties engaged in cover pricing and other bid rigging
activities. The Parties’ representations in relation to this evidence and the OFT’s
conclusions are also addressed on an Infringement-by-Infringement basis. The
Infringements are described in chronological order.

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(xiii) Thus for each Infringement, reference should be made not only to the particular
part of section IV.D setting out details of the Infringement, but also to the
relevant part of section IV.C detailing the cover pricing activities of any leniency
Party(ies) involved in that Infringement, and in addition to the general
comments on cover pricing in section IV.B, which precedes both of those parts.
The OFT has therefore included, in Annex A towards the end of this Decision, a
Navigation Table (see below), which details the paragraphs in which the case
against each Party may be found in relation to each relevant Infringement.

Section V – Legal Assessment

(xiv) This section assesses the Infringements against the Legal Background and sets
out the OFT’s conclusions, together with any representations from the Parties,
and the OFT’s response.

Section VI – Enforcement

(xv) This section states that the OFT is imposing financial penalties on each of the
Parties in respect of a maximum of three Infringements. It sets out the factors
the OFT has taken into account and its calculation methodology, including a
separate penalty calculation for each Infringement and application of a Minimum
Deterrence Threshold methodology at step 3 of the calculation.

(xvi) This section also describes how the OFT has applied reductions in penalty for
leniency Parties and discounts for non-leniency Parties that accepted the OFT’s
Fast Track Offer.

(xvii) The Parties’ representations on the OFT’s penalty calculations are also
addressed in this section.

Annex A – Navigation Table

(xviii) The Navigation Table in Annex A details the paragraphs in which the case
against each Party may be found in relation to each relevant Infringement. The
Parties are listed in alphabetical order and against each Party are listed the
Infringement(s) in which that Party engaged in bid rigging activities, together
with references to the relevant paragraphs in section IV.D describing that
Infringement and the relevant paragraphs in section IV.C describing the cover
pricing activities of the leniency Party(ies) involved in that Infringement, where
applicable.

(xix) The Navigation Table also makes it clear in respect of each Infringement: (a) for
a leniency Party, whether: (i) it will receive either full 100 per cent immunity for
that Infringement (because it is a But For Infringement for that Party); or (ii) it
will receive its allocated leniency percentage deduction from the penalty for that
Infringement (because it is a Not But For Infringement for that Party); or (iii)
there will be no penalty (because the Infringement is not amongst the most
recent three Not But For Infringements for the Party); and (b) for a non-leniency
Party, whether it is receiving a 25 per cent deduction from penalty on that
tender (because it accepted the OFT’s Fast Track Offer in respect of that
tender) or alternatively is not receiving any deduction from penalty on that
tender (because it did not accept the OFT’s Fast Track Offer in respect of that
tender).

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Annex B – List of Markets affected by each of the Infringements

(xx) The table in Annex B sets out the relevant product market and the relevant
geographic market into which the OFT considers each of the Infringements falls.
This forms the basis of the starting point for the OFT’s calculation of the
penalty for each of the Parties in respect of each of those Infringements.

Annex C – List of Parties whose directors the OFT considers were involved in one or
more of the Infringements

(xxi) The tables in Annex C contain a list of the Parties whose directors the OFT
considers were involved in one or more of the Infringements. The first table in
Annex C lists the Parties in respect of which the OFT has evidence of general
director involvement in bid rigging activities for all instances of bid rigging. The
second table lists the Parties in respect of which the OFT has evidence of
specific director involvement in bid rigging activities in relation to particular
Infringement(s). The OFT considers that the involvement of company directors
in the Infringements is an aggravating factor and has taken this into account at
step 4 of the penalty calculation as set out in Section VI.

Annex D – Annexes to Definition of Relevant Markets

(xxii) This section contains the Annexes D(1) to D(5) of section II.C, Definition of
Relevant Markets.
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INDEX

SECTION I – INTRODUCTION..............................................................................30
A. The purpose of this document ...................................................................30
B. Summary of the Infringements and the OFT’s enforcement action..................34
SECTION II – FACTUAL BACKGROUND................................................................35
A. The Parties..............................................................................................35
Introduction to this Section...........................................................................35
Points of general applicability and importance..............................................35
References to years (e.g. 2000, 2006).......................................................35
A. H. Willis and Sons Limited (‘A H Willis’).....................................................36
A.R.G. (Mansfield) Limited (‘ARG’)................................................................37
Ackroyd & Abbott Construction Limited (‘Ackroyd & Abbott Construction’)........37
Ackroyd & Abbott Limited (‘Ackroyd & Abbott’)..............................................37
Adam Eastwood & Sons Limited (‘Adam Eastwood’)........................................39
Sir John Eastwood Foundation (‘Eastwood Foundation’)...................................39
Admiral Construction Limited (‘Admiral’) ........................................................42
A C Holdings Limited (‘A C Holdings’)............................................................42
Allenbuild Limited (‘Allenbuild’).....................................................................44
Bullock Construction Limited (‘Bullock’)..........................................................44
Renew Holdings plc (‘Renew’).......................................................................44
Apollo Property Services Group Limited formerly known as Apollo London Limited
(‘Apollo’)....................................................................................................51
Apollo Holdco Limited formerly known as Apollo Group Holdings Limited (‘Apollo
Group’)......................................................................................................51
Arthur M. Griffiths & Sons Limited (‘Arthur M Griffiths’)...................................53
B & A Construction (Leicester) Limited (‘B & A’)..............................................54
Baggaley & Jenkins Limited (‘Baggaley & Jenkins’)..........................................55
Balfour Beatty Construction Limited (‘BBCL’) ..................................................56
Balfour Beatty Refurbishment Limited (‘BBRL’)................................................56
Balfour Beatty plc (‘Balfour Beatty plc’)..........................................................56
Mansell Construction Services Limited (‘Mansell’)............................................56
Mansell plc (‘Mansell plc’)............................................................................56
Ballast Nedam N.V. (‘Ballast Nedam’).............................................................65
Beaufort Construction (S-in-A) Limited (‘Beaufort’) ..........................................68
Beaufort Holdings U.K Limited (‘Beaufort Holdings’).........................................68
Bodill & Sons (Contractors) Limited (‘Bodill’)...................................................70
Bowmer and Kirkland Limited (‘Bowmer & Kirkland’)........................................70
B & K Property Services Limited (‘BKPS’).......................................................70
Bramall Construction Limited (‘Bramall’).........................................................73
Frank Haslam Milan & Company Limited (‘Frank Haslam Milan’) ........................73
Keepmoat Limited formerly known as Keepmoat plc (‘Keepmoat’)......................73
C.J. Ellmore & Company Limited (‘C J Ellmore’)..............................................76
Caddick Construction Limited (‘Caddick’)........................................................77
Caddick Group plc (‘Caddick Group’) .............................................................77
Carillion JM Limited (‘Mowlem’)....................................................................78
Clegg Construction Limited (‘Clegg’)..............................................................80
D E Clegg Holdings Limited (‘D E Clegg’)........................................................80
Connaught Partnerships Ltd (‘Connaught’)......................................................82
Connaught plc (‘Connaught plc’)...................................................................82
Crown Point Maintenance Group Limited (‘Crown Point’)..................................84
Davlyn Construction Limited (’Davlyn’)...........................................................89
Derwent Valley Construction Limited (’Derwent Valley’)...................................90
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Chevin Holdings Limited (‘Chevin’) ................................................................90
Dukeries Building Company Limited (‘Dukeries’) ..............................................92
Gavco 159 Limited (‘Gavco’)........................................................................92
Concentra Limited formerly known as Durkan Pudelek Limited ('Durkan')............94
Durkan Limited ('Durkan Limited')..................................................................94
Durkan Holdings Limited ('Durkan Holdings')...................................................94
E. Manton Limited (‘E Manton’)...................................................................105
E. Taylor & Sons (Southwell) Limited (‘E Taylor’)...........................................106
Trading as Carmalor Construction (‘Carmalor’)..............................................106
F. Parkinson Limited (‘F Parkinson’).............................................................107
Mowbray Holdings Limited (‘Mowbray’).......................................................107
Francis Construction Limited (‘Francis’)........................................................108
Barrett Estate Services Limited (‘Barrett’).....................................................108
Frudd Construction Limited (‘Frudd’)............................................................110
GAJ Construction Limited (‘GAJ’) ...............................................................111
GAJ (Holdings) Limited (‘GAJ Holdings’)......................................................111
G Carter Construction Limited (‘G Carter’)....................................................113
G.F. Tomlinson Building Limited (‘G F Tomlinson’).........................................114
G.F. Tomlinson Group Limited (‘G F Tomlinson Group’)..................................114
G G Middleton & Sons Limited (‘G G Middleton’)...........................................116
G. & J. Seddon Limited (’G & J Seddon’).....................................................117
Seddon Group Limited (‘Seddon’)................................................................117
GMI Construction Group plc (‘GMI’).............................................................119
GMI Construction Holdings plc (‘GMI Construction Holdings’) .........................119
Geo Houlton & Sons Limited (‘Geo Houlton’).................................................121
Geo. Houlton & Sons (Holdings) Limited (‘Geo Houlton Holdings’)....................121
Greswolde Construction Limited (‘Greswolde’)..............................................123
Mantisson Limited (‘Mantisson’)..................................................................123
Hall Construction Group Limited (‘Hall’)........................................................124
Harlow and Milner Limited (‘Harlow & Milner’)..............................................125
Harold Adkin & Sons (Sutton-In-Ashfield) Limited (‘Harold Adkin’)...................126
Haymills (Contractors) Limited now trading as Straw Realisations (No1) Limited
(‘Haymills’)...............................................................................................127
Corringway Conclusions plc (‘Corringway’) previously known as Haymills plc
(‘Haymills plc’)..........................................................................................127
Haymills Group Limited (‘Haymills Group’)....................................................127
Henry Boot Construction (UK) Limited (‘Henry Boot’).....................................132
Henry Boot plc (‘Henry Boot plc’)................................................................132
Herbert Baggaley Construction Limited (‘Herbert Baggaley’)............................135
Baggaley Group Limited (‘Baggaley Group’)...................................................135
Hill Bros. (Nottingham) Limited (‘Hill’) ..........................................................136
Hobson and Porter Limited (‘Hobson & Porter’) .............................................137
Holroyd Construction Limited (’Holroyd’)......................................................138
Holderness Investments Limited (‘Holderness’)..............................................138
Holroyd Construction Group Limited (‘Holroyd Group’)...................................138
Interclass Public Limited Company (‘Interclass’).............................................141
Interclass Holdings Limited (‘Interclass Holdings’)..........................................141
Interserve Project Services Limited (‘Interserve’)............................................143
Interserve plc (‘Interserve plc’)....................................................................143
Irwins Limited (‘Irwins’)..............................................................................146
Jack Lunn (Construction) Limited (‘Jack Lunn’).............................................146
Jack Lunn (Holdings) Limited (‘Jack Lunn Holdings’)......................................146
J. Harper & Sons (Leominster) Limited (‘J Harper’)........................................149
Harper Group plc (‘Harper plc’)....................................................................149
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JH Hallam (Contracts) Limited (‘J H Hallam’) ................................................151
JH Hallam (R & J) Limited (‘Hallam’)............................................................151
J. J. & A. R. Jackson Limited (‘J J & A R Jackson’)......................................153
J. J. McGinley Limited (‘J J McGinley’)........................................................153
McGinley Holdings Limited (‘McGinley Holdings’)...........................................153
John Cawley Limited now trading as John Cawley Developments Limited (‘John
Cawley’)..................................................................................................156
John Sisk & Son Limited (‘John Sisk’)..........................................................157
Sicon Limited (‘Sicon’)...............................................................................157
K. J. Bryan (Builders) Limited (‘K J Bryan’) ...................................................161
Kier Regional Limited (‘Kier’).......................................................................161
Kier Group plc (‘Kier Group’).......................................................................161
Lemmeleg Limited (‘Lemmeleg’)..................................................................164
Rok plc (‘Rok’)..........................................................................................164
Lindum Construction Co. Limited (‘Lindum’)..................................................166
Lindum Group Limited (‘Lindum Group’) .......................................................166
Linford Group Limited (‘Linford’)..................................................................169
F. & E.V. Linford Limited (‘F & E V Linford’)..................................................169
Loach Construction & Development Limited (‘Loach’).....................................170
Lotus Construction Limited (‘Lotus’)............................................................171
Milward Construction (Belper) Limited (‘Milward’)..........................................172
Morgan Ashurst plc formerly known as Bluestone plc (‘Bluestone’)..................173
Morgan Sindall plc (‘Morgan Sindall’)...........................................................173
North Midland Construction plc (‘North Midland’)..........................................175
P D H Developments Limited (‘PDH’)............................................................176
G. Hurst & Sons Limited (‘G Hurst’).............................................................176
P. Casey & Co. Limited (‘P Casey’)..............................................................178
The Casey Group Limited (‘The Casey Group’)..............................................178
P. Waller Limited (‘P Waller’).......................................................................179
Pearce Construction (Midlands) Limited (‘Pearce’)..........................................180
ISG Pearce Limited (formerly Pearce Group Limited formerly Pearce Group plc)
(‘Pearce Group’)........................................................................................180
Crest Nicholson plc (‘Crest Nicholson’).........................................................180
Peter Baines Limited (‘Peter Baines’)............................................................189
Phoenix Contracts (Leicester) Limited (‘Phoenix’)...........................................190
ISG Jackson Limited (‘Jackson’)..................................................................191
ISG Regions Limited formerly known as Totty Construction Group Limited (‘Totty’)
...............................................................................................................191
ISG Regions Building Limited formerly known as Totty Building Services Limited
(‘Totty Building’).......................................................................................191
Propencity Limited.....................................................................................191
Propencity Group Limited (‘Propencity’)........................................................191
Quarmby Construction Company Limited (‘Quarmby’)....................................198
St James Securities Holdings Limited (‘St James Securities’)..........................198
Quarmby Construction (Special Projects) Limited (‘Quarmby (Special Projects)’) 202
Justgrade Limited (‘Justgrade’)...................................................................202
R Durtnell & Sons Limited (‘R Durtnell’)........................................................204
R Durtnell & Sons (Holdings) Limited (‘Durtnell Holdings’)...............................204
R.G. Carter Limited (‘R G Carter’)................................................................206
R.G. Carter Building Limited (‘R G Building’)..................................................206
R.G. Carter Holdings Limited (‘R G Holdings’)................................................206
Richardson Projects Limited (‘Richardson Projects’)........................................208
Robert Woodhead Limited (‘Robert Woodhead’).............................................209
Robert Woodhead Holdings Limited (‘Woodhead Holdings’).............................209
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Robinson & Sawdon Limited (‘Robinson & Sawdon’)......................................211
Shaylor Construction Limited (‘Shaylor’).......................................................211
Simons Construction Limited (‘Simons’).......................................................213
Wrights Construction (Lincoln) Limited (‘Wrights (Lincoln)’) ............................213
Simons Group Limited (’Simons Group’).......................................................213
SOL Construction Limited (‘Sol’) .................................................................216
Barkbury Limited (‘Barkbury’)......................................................................216
Speller-Metcalfe Malvern Limited formerly known as Speller-Metcalfe Limited
(‘Speller-Metcalfe’)....................................................................................218
Stainforth Construction Limited (‘Stainforth’)................................................219
Strata Construction Limited (‘Strata’)...........................................................219
T. & C. Williams (Builders) Limited (‘T & C Williams’).....................................220
T. Denman & Sons (Melton Mowbray) Limited (‘T Denman’)...........................221
TF Realisations Limited formerly known as Thomas Fish & Sons Limited (’Thomas
Fish’).......................................................................................................222
Fish Holdings Limited (‘Fish Holdings’).........................................................222
Thomas Long & Sons Limited (‘Thomas Long’)..............................................224
Radford Holdings Limited (‘Radford’)............................................................224
Thomas Vale Construction plc (‘Thomas Vale’) .............................................226
Thomas Vale Holdings Limited (‘Thomas Vale Holdings’)................................226
Thorndyke Limited (‘Thorndyke’).................................................................228
Try Accord Limited (‘Try Accord’) ...............................................................230
Galliford Try Construction Limited (‘Galliford Construction’)............................230
Galliford Try plc (‘Galliford Try’)..................................................................230
W.R. Bloodworth & Sons Limited (‘W R Bloodworth’).....................................234
Wiggett Bros & Co Limited (‘Wiggett’).........................................................235
Wildgoose Construction Limited (’Wildgoose’)...............................................235
William Sapcote and Sons Limited (‘William Sapcote’)....................................236
Sapcote Holdings Limited (‘Sapcote Holdings’)..............................................236
William Woodsend Limited (‘William Woodsend’)...........................................238
Willmott Dixon Construction Limited (‘Willmott Dixon’)..................................239
Willmott Dixon Holdings Limited formerly known as Willmott Dixon Limited
(‘Willmott Dixon Limited’)...........................................................................239
Wright (Hull) Limited (‘Wright (Hull)’)...........................................................241
T. Wright & Son (Holdings) Limited (‘T Wright Holdings’) ...............................241
Wygar Construction Co Limited (‘Wygar’).....................................................243
Wygar (Holdings) Limited (‘Wygar Holdings’) ................................................243
York House Construction Limited (‘York House’) ...........................................245
B. The OFT’s Investigation..........................................................................246
The initial contact......................................................................................246
Section 27 inspections in November 2004....................................................246
Section 28 searches of premises in June and July 2005.................................246
Section 27 inspections in January 2006.......................................................248
Section 28 searches of premises in February/March 2006..............................249
Section 28 searches of premises in March 2006 ...........................................250
Interviews conducted in October/November 2006 .........................................251
Section 27 inspections in January 2007.......................................................252
Section 26 notices sent during the course of the investigation........................252
Consolidation of the investigation................................................................253
The position of the non-leniency Parties.......................................................256
The position of the leniency Parties .............................................................257
But For tenders.........................................................................................257
Fining for a maximum of three Not But For tenders........................................258
Further interviews conducted......................................................................258
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