By Lilly Vitorovich and Daniel Thomas
LONDON -- After a lengthy investigation, the Britain's Office of Fair Trading alleged that 112 construction companies have engaged in illegal price fixing on building projects.
The competition watchdog alleges that the construction companies engaged in bid-rigging activities on projects, including housing and tenders for schools, universities and hospitals.
The regulator said it has received evidence of price-fixing "implicating many more companies on thousands of tender processes," but has focused its investigation on about 240 alleged infringements.
The companies identified include nine that are publicly traded: Balfour Beatty /zigman2/quotes/202863772/delayed UK:BBY +0.69% PLC, Henry Boot PLC, Renew Holdings /zigman2/quotes/203993691/delayed UK:RNWH +1.56% PLC, Connaught PLC, Interserve PLC, Kier Group /zigman2/quotes/209470443/delayed UK:KIE -1.28% PLC, ROK PLC, Morgan Sindall PLC and Galliford Try /zigman2/quotes/209256748/delayed UK:GFRD -1.53% PLC.
Balfour Beatty and Henry Boot said they implemented controls and applied for leniency. Connaught, Interserve, Kier, Morgan Sindall and Galliford Try said they were considering the allegations and would fully cooperate with the investigation. Representatives for ROK and Renew said their companies were considering their positions before responding.
Under European Union competition law, a company convicted of involvement in cartel activities can be fined as much as 10% of its annual revenue, but, in practice, penalties are often considerably lower.
The Office of Fair Trading's allegations primarily involve "cover pricing," a situation in which one or more bidders collude with a competitor during a tender process to obtain a higher price.
Specifically, the regulator said that during a tender process, one or two of the companies that were asked for a quote would submit an artificially high bid that was never intended to win. In a minority of cases, the successful bidder would then pay its rival, usually using false invoices.
"The only motive in these cases was to avoid winning the work without upsetting the client and so stay on future tender lists," the Construction Confederation, which represents 5,000 companies, said in a statement that called for a sensible and proportionate response to the findings. "Putting in a high bid to avoid winning the work is not an infringement of competition law."
The watchdog says it received 37 leniency applications and all the other parties received offers of reduced financial penalties, which led to more than 40 additional companies admitting participation in bid-rigging activities.
The companies now have the opportunity to make written and oral representations, which the regulator will take into account before deciding whether competition law has been infringed and the appropriate amount of any penalties.
Office of Fair Trading Chief Executive John Fingleton said: "Cartel activity of the type alleged today harms the economy by distorting competition and keeping prices artificially high."