Judgment (non-confidential version)

Case(s):

    Neutral citation:

    [2011] CAT 3

    Published:

    11 Mar 2011

    Download:

    Summary:

    Judgment following six appeals by ten appellants (“the Appellants”) against a decision of the Office of Fair Trading dated 21 September 2009 entitled “Bid rigging in the construction industry in England” (“the Decision”). In the Decision the OFT found that, in the period 2000 to 2006, 103 undertakings had each committed between one and three infringements of the prohibition contained in section 2 of the 1998 Act, which applies to agreements or concerted practices which have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom. The OFT imposed penalties totalling £129.2m, of which nearly £42m were imposed on the Appellants.

    The majority of the infringements involved cover pricing, whereby a company that was invited to tender for a construction contract, but did not wish to win the contract, sought a cover price from another company tendering for that contract. The cover price provided was at a level to ensure that the former company did not win the tender, although it was submitted to the client as though it was a genuine tender. The principal rationale for cover pricing was to ensure that a company could remain on the client’s tender list in circumstances where it was unable or unwilling to carry out the particular project for which the invitation to tender was issued.

    Before considering the individual position of each of the Appellants, the Tribunal expressed its conclusions on a number of issues which had arisen in all or some of the six appeals.

    In particular, the Tribunal concluded:

    - that the final penalties imposed by the OFT on each of the Appellants for “simple” cover pricing were excessive given the nature of the infringement, together with the harm it was likely to cause, together with certain general mitigation, including the fact that the practice was long-standing in the industry and widely regarded as legitimate;

    - that for such infringements the figure of 5% of turnover in the relevant market, adopted by the OFT as its starting point at Step 1 of its Guidance as to the appropriate amount of a penalty (“the Guidance”) was too high where the maximum for the most heinous infringements was 10%;

    - that the OFT’s interpretation of the Guidance as meaning that “relevant turnover” was measured in the undertaking’s last business year prior to the Decision was incorrect; the Guidance should be interpreted as referring to the year preceding the date when the infringement came to an end;

    - that the Minimum Deterrent Threshold (“MDT”), used by the OFT at Step 3 of the Guidance, was by its nature and application such as to give rise to penalties which were excessive and disproportionate. The MDT calculation represented the OFT’s view of the minimum figure needed to deter the undertakings concerned and other similar sized undertakings from engaging in unlawful behaviour of the kind found in the Decision. In respect of those undertakings found to have committed “simple” cover pricing infringements, the MDT was set at an amount equal to 0.75% of the undertaking’s total worldwide turnover in the last business year prior to the Decision. The Tribunal held that the MDT was applied mechanistically and as a substitute for an individual assessment of the relevant factors of each case.

    Applying these conclusions to the six appeals within the general structure of the Guidance, and having resolved further issues specific to the individual cases, the Tribunal varied the global penalties imposed on the Appellants as follows:


    - Kier Group plc and Kier Regional Limited: the original total penalty of £17,894,438 was varied to £1,700,000.

    - Ballast Nedam N.V.: the original total penalty of £8,333,116 was varied to £534,375.

    - Bowmer and Kirkland Limited, B&K Property Services Limited: the original total penalty of £7,574,736 was varied to £1,524,000.

    - Corringway Conclusions plc: the original total penalty of £769,592 was varied to £119,344.

    - Thomas Vale Holdings Limited and Thomas Vale Construction Limited: the original total penalty of £1,020,473 was varied to £171,000.

    - John Sisk & Son Limited and Sicon Limited: the original total penalty of £6,191,627 was varied to £356,250.

    This is an unofficial summary prepared by the Registry of the Competition Appeal Tribunal.