City centre builders part of OFT price-fixing inquiry

Apr 18 2008 by Alex Turner, Liverpool Daily Post

THE builders of Liverpool One and the Museum of Liverpool were among more than 100 firms named in a price-fixing investigation yesterday.

The Office of Fair Trading (OFT) has identified 240 alleged cases involving 112 construction firms in one of its largest-ever investigations.

Balfour Beatty, whose projects include Liverpool One and the Pier Head cruise liner terminal, and Museum of Liverpool builder Galliford Try, are named on the OFT’s statement of objections list.

The OFT said more than 40 companies had already admitted price-fixing and another 37 had applied for leniency.

Balfour Beatty confirmed that it had co-operated with the investigation and had been granted leniency. A company statement said it “is confident that all of its subsidiaries are now fully compliant with the Competition Act”.

Galliford Try, which was contacted by the OFT last May regarding 17 tenders submitted between 2000 and 2005, said: “Galliford Try has fully co-operated with the OFT’s enquiries throughout its investigation. It will now review the OFT's provisional findings in detail and will respond accordingly.”

The more serious allegations of bid-rigging involve compensation payments, covered by false invoices. The OFT believes that some of the construction companies entered into arrangements for a successful tenderer to pay an agreed sum of money to those who were unsuccessful.

However, most of the allegations relate to cover pricing.

This describes the practice of when one or more bidders collude with a competitor during a tender process to obtain a price which is intended to be too high to win the contract.

The OFT argues that when the tendering authority is unaware this has happened, it will have a false impression of the level of competition which could lead to paying inflated prices. Such arrangements have previously been found to be illegal.

John Fingleton, OFT chief executive, said: “Cartel activity of the type alleged today harms the economy by distorting competition and keeping prices artificially high.

“This investigation will hopefully send out a strong message to the construction industry about the seriousness with which we view suspected anti-competitive behaviour.”

The inquiry started in 2004 after concerns were raised about the bidding for construction deals in Nottingham and has gone on to consider evidence related to suspect tendering on construction projects in the public and private sector worth £3bn.

The companies can now make representations to the OFT before the competition watchdog makes a final decision on whether competition law has been infringed and, for those firms that have, the level of fines to be imposed.

alex.turner