Firms told to expect fines running into millions of pounds
Demolition firms have been told to expect penalties running into tens of millions of pounds by the end of the year after the Competition and Markets Authority released its provisional findings into bid rigging by 10 companies following a years-long probe.
The CMA said its investigation, begun in March 2019, had found the firms had illegally colluded to rig bids for demolition and asbestos removal contracts worth over £150m.
“The bids were rigged by one or more construction firms which agreed to submit bids that were deliberately priced to lose the tender [known as cover pricing],” it added.
And it said that several received ‘compensation payments’ for deliberately losing bids with, in one case, a payment being made that totalled more than £500,000.
Among the companies caught up in the probe covering a five and a half year period up to June 2018 are McGee, Careys-owned Scudder, which dropped its name last year, Keltbray and John F Hunt. Also under the spotlight are Brown and Mason, Cantillon, Clifford Devlin and DSM.
The cartel-buster added these eight have admitted participation but two others – Erith and Squibb – have not admitted wrongdoing and will be contesting the provisional findings.
The CMA said McGee and Scudder “reported their involvement in the conduct under the CMA’s leniency policy and will benefit from a discount on any fine”.
It added “The findings are provisional and it should not be assumed that any company has broken the law at this stage.”
In all, the CMA said 19 jobs were hit by bid-rigging including the Old War Office in London, the redevelopment of Bow Street Magistrates Court, the Metropolitan Police training centre in north London, redevelopment work at Selfridges on Oxford Street, redevelopment work for Oxford University, shopping centres in Reading and Taplow, a new building for the LSE at Lincoln’s Inn Fields and the refurbishment of a City office building at 135 Bishopsgate.
And it said that seven of the 10 were at least once involved “in arrangements by which the designated ‘losers’ of the contracts were set to be compensated by the winner. The value of this compensation varied but was higher than £500,000 in one instance. Some firms produced false invoices in an attempt to hide this part of the illegal behaviour.”
It said Erith and Squibb were also contesting this finding, with John F Hunt, Clifford Devlin and Keltbray the three firms found not to have participated in making or receiving these payments.
The CMA’s senior director of cartels Juliette Enser told Building that Erith and Squibb now had the chance to make ‘representations’ to its case decision group which will decide on their merit in the coming months. “Parties who wish to challenge can also do so through the courts,” she added.
An announcement on Erith’s and Squibb’s fate is expected in November with the amount that firms will be told to pay in fines also due to be disclosed at the same time.
The CMA has carried out five investigations into the construction industry in recent years which have seen a cumulative £60m handed out in penalties.
Enser said she hoped “the size of the penalties we’ve been applying will have the required deterrent effect”.
She declined to put a number on how much the 10 demolition firms can expect to face in fines, or whether directors will face disqualification, but conceded penalties are likely to run into many millions of pounds.
In their latest report and accounts, Careys said it had set aside a £9m provision for “a regulatory matter” while last week Keltbray said it was making a £6m provision for the same reason.
Enser, who led the investigation and has been at the CMA and its predecessor the Office of Fair Trading for more than a decade, said: “It’s a big investigation. This kind of conduct is very serious. Given construction is a hugely important industry, it’s important that where there is lingering poor practice, we stamp it out.”
What demolition firms have said
Keltbray
“Keltbray strongly condemns anti-competitive practices and, having co-operated fully and formally settled its case with the CMA, acknowledges the findings relating to isolated activities of a previous management team in a subsidiary business.
“As the CMA investigation has confirmed, Keltbray Limited did not benefit from the award of any contracts nor received any compensation payments arising from this infringement activity.
Since 2019 Keltbray has transformed its organisational structure and corporate governance framework and has assured all stakeholders that these historic practices will not occur in the future.”
Brown and Mason
“Brown and Mason continues to cooperate fully with the CMA’s investigation into allegations of anticompetitive behaviour in the UK demolition sector.
“In order to draw a line under this, Brown and Mason have agreed to settle in relation to two historic, unconnected and isolated instances that took place under previous management nearly a decade ago. No customers were adversely affected by Brown and Mason’s conduct and we remain committed to delivering the highest possible level of technical, commercial and ethical service to our customers.
“Competition law compliance is at the core of our business, with our new, progressive management team having taken extensive and appropriate steps to reinforce our competition law compliance measures.”
John F Hunt
“John F Hunt acknowledges and accepts the findings of the CMA investigation which has provisionally found that John F Hunt was involved in breaches of competition law in relation to a small number of historic and unrelated bids.
“We note the CMA’s acknowledgement that John F Hunt was not involved in any compensation arrangements relating to those bids. John F Hunt also did not benefit from the award of any of the relevant contracts.
“The Group has fully cooperated with the CMA’s investigation and is fully committed to compliance with competition law. We have strengthened our competition law compliance measures and do not condone any activity which limits or restricts competition in the market.”
McGee
“McGee acknowledges historic Competition Act infringements as announced by the CMA. These infringements took place under the previous ownership and leadership structure.
“Throughout the period of the investigation, McGee has co-operated fully with the CMA. Having reached a final settlement position, McGee has certainty over the quantum of its fine and has made full provision in its previous audited financial statements. Accordingly, there will be no further financial impact on McGee arising from the investigation.”
Cantillon
“Today the Competition and Markets Authority (CMA) announced the findings of its investigation into anti-competitive behaviour during the period of 2009-2019. This found that Cantillon was one of a number of demolition companies that engaged in this behaviour, with instances from 2013-2017. We have worked closely with the CMA on this civil investigation by cooperating fully, and do not dispute the findings.
“Cantillon has a proud record stretching back over 50 years. This culture informed our decision to proactively end these practices back in 2017 and reform our internal governance and cultural approach to prevent them from reoccurring. The Cantillon of 2022 is a very different business to that of 2017. We have accepted the fine and apologise to our customers and stakeholders for our previous lapse in standards.”
TE Scudder/Careys
“Today, the Competition and Markets Authority (CMA) published a press release regarding investigations into suspected anti-competitive arrangements in the supply of demolition construction services in Great Britain.
“T.E. Scudder Limited has been listed as an involved party and as a leniency applicant. In line with the CMA’s usual practice, it has automatically held T.E Scudder Limited’s parent companies, P.J. Carey Plant Hire (Oval) Limited and Carey Group Limited liable as well. We want to take this opportunity to sincerely apologise for the actions that resulted in this investigation. The behaviours that were exhibited were not acceptable and are certainly not in line with our values.”
Squibb
“Earlier today the Competition and Markets Authority (the “CMA”) has, after investigating suspected historical anti-competitive behaviour in the provision of demolition and related services between January 2013 and June 2018, announced that it has provisionally found that ten firms illegally colluded to rig bids for demolition and asbestos removal contracts.
“Eight of the ten firms have admitted their involvement in at least one instance of bid rigging. Squibb Group Limited has not admitted its involvement and the CMA notes in its announcement that it should not be assumed that Squibb Group Limited has broken the law.
“Squibb Group Limited will continue to engage with the CMA regarding its assessment of the facts relating to Squibb and the market for demolition services. In accordance with the process, the CMA is required to consider Squibb’s representations before finalising its decision. We have a high degree of confidence that the CMA will take Squibb’s submissions/concerns seriously. Further updates are expected later in 2022.”
Erith, DSM and Clifford Devlin have all been contacted for comment
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