Anti-competitive practices
The Competition and Markets Authority (CMA) has a new campaign calling on business to shun anti-competitive practices. These practices include price-fixing, bid-rigging and dividing markets or customers between competitors - commonly referred to as market sharing - and can take place in any business. Research conducted on behalf of the CMA revealed that the general understanding of the illegality of these business practices is low.
CMA research findings
29% of those surveyed thought it was OK to attend meetings with competitors to agree prices. A further 32% thought agreeing not to supply each other’s customers was legal, and a quarter (25%) saw no problem with discussing bids and agreeing who would get which tenders. The research goes on to show that only 6% of management teams of the construction firms surveyed had either received competition law training or looked for information on how to comply with the law.
Construction cartels
In simple terms, a cartel is an agreement between businesses not to compete against one another. The CMA has had a sustained crackdown against illegal cartels and has issued over £43 million in fines last year alone. Howard Cartlidge, the CMA’s Senior Director of Cartels, said:
“The CMA is cracking down on businesses that collude to rip off customers by fixing prices, sharing out markets amongst themselves or rigging bids. Our message to them is that we know cheating when we see it, even if you don’t. Pleading ignorance is no defence; it’s up to businesses to know what these unfair practices look like and avoid them. By ensuring you stay on the right side of the law, you can avoid substantial fines, director disqualification or jail. And if you suspect something illegal is going on, report it to us before it’s too late.”
Most businesses want to do the right thing and the campaign is designed to help them do that and to ensure fair dealing. The CMA has also lifted the lid and highlighted the secret conversations that take place inside illegal cartels. An investigation into a pre-cast concrete drainage cartel that resulted in £36m in fines in 2019, revealed that the businesses concerned held regular secret meetings (four of which were secretly recorded by the CMA), away from business premises in hotel meeting rooms. The businesses discussed and agreed certain price lists, which were then used by sales teams as a basis for negotiating with customers. They also agreed that they would not compete for each other’s customers on certain fixed price contracts. One of the individuals at a cartel meeting said:
“…I’m quite happy if we agree jobs, because you know, it is pointless cutting the bloody price, we should be sticking out, as we’ve always said, get a better price…”
IFF Research conducted a survey of 400 construction business leaders in January 2020. For more information see our ‘Cheating or Competing?’ campaign webpage: gov.uk/cheatingorcompeting.
