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26/02/2020

CMA advises on avoiding collusion in construction

Subject: Competition law

Source: Competition and Markets Authority (CMA)

The CMA has published guidance on avoiding collusion in construction: for project directors and managers.

The guidance draws attention to the practice of “bid rigging” i.e. when suppliers illegally agree amongst themselves which of them will win a particular bid in order to avoid competing to make customers the best offer at the lowest price.

Such agreements may take several forms, such as:

* bid rotation: firms agree to take it in turns to submit the lowest bid;

“ bid suppression: one or more firms agree not to bid, or to withdraw their bids;

* cover pricing: bidders arrange for one or more of them to submit an artificially high bid, distorting the procurer’s impression of the competitive price.

Bid rigging is a form of illegal cartel activity. Business cartels may also involve other illegal practices such as sharing commercially sensitive information, fixing prices (keeping them artificially high) and dividing up markets with competitors.

Directors, managers and suppliers of construction firms should be aware of the potential sanctions which can be imposed for such illegal activity. Firms may be fined up to 10% of their annual worldwide turnover; company directors may be disqualified from acting as directors or being involved in the management of a company. In the most serious cases, individuals may be prosecuted resulting in personal fines and even prison. Customers adversely affected by the activity may recover damages in the courts.

Apart from the legal sanctions, the unfavourable publicity may lead to adverse reputational impact and damage to the firm’sr chances of winning future contracts,

If a firm is approached to get involved in anti-competitive behaviour, it should clearly and immediately reject the approach, report the incident internally, seek independent legal advice and report to the CMA. A firm which reports such approaches at an early stage can from immunity from fines and prosecution.

The CMA invite firms and their directors and managers to review their our construction cartel case studies to learn more about cases where the CMA has taken action.

 

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