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Sept. 22, 2009, 9:10 p.m. EDT

British Builders Fined for Collusion

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By Kaveri Niththyananthan

LONDON -- Britain's competition watchdog, the Office of Fair Trading, said it imposed fines totaling £129.5 million ($210 million) against 103 construction companies it found had colluded with rivals on building contracts.

The fines stemmed from an investigation into cover pricing, a form of bid rigging in which bidders agree in advance who will win a contract and then submit inflated bids, increasing the likelihood the client will pay more for a project than if they had made blind bids.

The OFT probe started with a complaint in the East Midlands in 2004, but expanded nationally as it became clear how widespread cover pricing was. The agency said it found illegally rigged bids on 199 tenders between 2000 and 2006 on projects including schools, university hospitals and private projects valued at more than £200 million.

The OFT said it also found six instances in which successful bidders had paid compensation to an unsuccessful bidder of between £2,500 and £60,000.

In Britain, price-fixing fines can be as high as 10% of a company's world-wide revenue. In this case, the companies were fined an average of £1.26 million, representing roughly 1.1% of their annual revenue.

The OFT said 86 of the 103 firms it found guilty of price fixing received lower penalties because they admitted their involvement. It said it won't pursue nine companies it named in its statement of objections due to insufficient evidence.

The companies fined and the penalties assessed against them included Kier Group /zigman2/quotes/209470443/delayed UK:KIE +7.92% PLC, £17.9 million; Interserve PLC, £11.6 million; Galliford Try /zigman2/quotes/209256748/delayed UK:GFRD -0.90% PLC, £8.3 million; and Balfour Beatty /zigman2/quotes/202863772/delayed UK:BBY +0.27% PLC's Mansell unit, £5.2 million.

Kier Group said in a statement the investigation found it breached laws on three tenders between 2001 and 2005.

"At no point has the OFT alleged or found that Kier paid or received any compensation payments," it said. Kier added it was assessing OFT's decision and "is considering its position."

Interserve said a subsidiary was deemed to have been involved in two instances of price covering in 2000, but "it neither gave nor received any compensation payment of any kind." Interserve said it cooperated with the OFT during the investigation and had reinforced its compliance and controls.

Galliford Try cited three incidences of cover pricing that took place over the past five to eight years, but it added that the price paid by the client wasn't found to have increased. It said it didn't financially gain or receive compensation payments from the cover pricing and added those businesses involved have since closed down or been restructured. The company said it will consider whether there were grounds for an appeal.

Balfour Beatty said the breaches by its Mansell unit took place before it acquired the company. It said it has developed a training program so all key employees were aware of the law and didn't repeat offenses.

Write to KaveriNiththyananthan at kaveri.niththyananthan@dowjones.com

/zigman2/quotes/209470443/delayed
UK : U.K.: London
51.80 p
+3.80 +7.92%
Volume: 1.32M
Sept. 25, 2020 4:35p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
£82.78 million
Rev. per Employee
N/A
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/zigman2/quotes/209256748/delayed
UK : U.K.: London
78.00 p
-0.71 -0.90%
Volume: 410,922
Sept. 25, 2020 4:35p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
£86.40 million
Rev. per Employee
N/A
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/zigman2/quotes/202863772/delayed
UK : U.K.: London
222.80 p
+0.60 +0.27%
Volume: 859,272
Sept. 25, 2020 4:35p
P/E Ratio
14.76
Dividend Yield
0.94%
Market Cap
£1.54 billion
Rev. per Employee
N/A
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