The price could be steep if your staff indulge in cartel behaviour

Juliette Enser is senior director of cartels at the Competition and Markets Authority

In March, the Competition and Markets Authority (CMA) fined 10 construction firms nearly £60m for illegally colluding over £150m-worth of private and public sector contracts. This was just the latest example of our focus to root out anticompetitive behaviour. It’s crucial that clients are protected and don’t pay over the odds for services – particularly in the public sector, where taxpayers are the ones left out of pocket.

“We recently increased our cash reward for whistleblowers to £250,000”

While the majority of firms treat customers fairly, the construction sector has a history of the most serious competition-law breaches, including cartels. Examples of cartel behaviour are: agreeing not to pursue each other’s customers (market sharing); discussing tender bids with competitors (bid rigging/cover pricing); and making any agreement on prices – for example, to increase profits (price fixing). Our job is to stamp out this behaviour, which causes serious damage to customers.

Firms must know the rules and have the necessary policies and procedures in place. A lack of awareness of competition law is a major risk factor, particularly for staff in roles that cover sales, contract bidding, price-setting and talking to competitor employees. Businesses should be asking, “Do our staff fully understand competition law and the consequences if they breach it?”

Firms also have a responsibility to check the compliance standards of any businesses they acquire and take action if they fall short. Once it is under new ownership, that owner is responsible.

Company directors must lead by example and have personal responsibility for ensuring companies comply with the law. The consequences of anticompetitive behaviour are serious and may include corporate fines running into millions (up to 10 per cent of worldwide group turnover), fines for individuals, director disqualification, or – in the most serious cases – prison.

Since 2017, the CMA has fined the industry £136m across six cartel cases. These covered a broad spectrum of services and products, ranging from demolition to concrete drainage, groundworks products, office fit-out services, galvanised steel tanks and roofing materials. Manufacturers, suppliers and contractors – there is no part of the industry that is above the law.

Alongside these large fines, 28 company directors have been disqualified due to their part in these cartel cases. In the latest bid-rigging case, four directors were disqualified for a combined total of 25 years.

On top of this, businesses also suffer reputational damage and may be excluded from public tenders or sued by customers and competitors for losses caused by their breach of competition law – all of which can wreak havoc on the future of a company.

Reporting wrongdoing

The CMA is putting public procurers on high alert by engaging extensively with commercial teams, and introducing dedicated training models and sessions.

We recently increased our cash reward for whistleblowers to £250,000 if they provide crucial information that helps us catch a cartel. The reward is separate from the CMA’s leniency programme, where a business or an individual that has participated in a cartel may escape sanctions if they come forward with information. The CMA also has strong powers of investigation and can spring surprise inspections on companies and individuals suspected of breaking the law.

We want to support those in the construction industry who are working within the law to build their businesses and grow the economy. For more information on what cartels are, how to avoid them and how to report one, people should visit the CMA’s ‘Cheating or Competing?’ page.

Be in no doubt, the CMA will be watching the sector carefully to put an end to harmful cartel activity and build a better future for law-abiding businesses.

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