OFT crackdown on unfair bids

The Office of Fair Trading is after more scalps in the construction industry and it’s closing in on contractors. Could your firm be at risk of a hefty fine amounting to up to 10% of your turnover?

In its latest investigation the OFT claims to have uncovered evidence that £3bn of tenders have been unfairly bid – but don’t be tempted to think it’s only after the large companies. Last year the watchdog fined 13 roofing contractors a total of £2.3m.

The OFT is on the lookout for anti-competitive practices which contravene the Competition Act 1998. These practices may be happening in an informal way in many businesses. Investigators have uncovered evidence of cover pricing and in some cases ‘bungs’ between competitors in return for cover prices.

Over the past two years the OFT has conducted dawn raids on 57 construction companies and received 37 applications for leniency. It wrote to some of the other firms offering them reduced penalties for whistle-blowing on competitors if they came forward within a few weeks. At this stage no one knows what evidence it has on what companies, so it’s a game of nerves.

The investigation focused on construction firms in the East Midlands, Yorkshire and Humberside, but the OFT says it has evidence from other parts of England. Evidence has come from digital as well as paper sources, and from ex-employees.

Lawyers have warned that even firms who have been investigated but have not received a letter could still be in danger because further whistle-blowing could implicate them. Even firms who were not investigated should come forward, according to an OFT spokeswoman. ‘In all these cases it’s better if you think that you have broken cartel laws, you should come forward. We have options to help people that help themselves,’ she said.

To avoid facing this situation in the future, lawyer Andrew James of Harrison Clark recommends that companies should train their staff and have procedures and policies in place which make it clear that practices such as cover pricing are illegal and could result in disciplinary action.

For those who may be under suspicion, it’s a case of sitting it out – and maybe getting the lawyers in.

So what's anti-competetive?

• Bid suppression – when companies agree amongst themselves who’s going to tender.
• Bid rotation – when companies take it in turns to put in the lowest tender.
• Cover pricing – when the firm that wants to bid, but doesn’t want to win, finds out other’s tender prices and puts in one high enough not to get the job.