Competition and Markets Authority warns contractors to stop cheating
The CMA has issued a warning to businesses with a new campaign, which asks firms if they are “Cheating or Competing?”, as new research shows that nearly one third of contractors think it’s acceptable to agree prices with competitors.
The launch comes after a sustained crackdown against illegal cartels by the Competition and Markets Authority (CMA), which issued over £43 million in fines last year.
Anti-competitive practices like price fixing, bid rigging and dividing markets or customers between competitors – commonly referred to as market sharing – can take place in any business. However, a number of recent CMA cases have come from the construction industry.
New research, conducted on behalf of the CMA, revealed that only 6% of firms in construction were familiar with competition law and that general understanding of the illegality of these business practices is low.
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 received competition law training. Additionally, only 6% of the respondents had actively sought out information on how to comply with the law.
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.”
The CMA understands that most businesses want to do the right thing and the campaign is designed to help them do that and to ensure fair dealing. Putting an end to an illegal cartel means that businesses and customers don’t lose out because others choose to cheat – cheating that comes with serious consequences.
Today, 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 cartelthat 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…”
And another said:
“…just set the term deals up, set the … market rates up and the merchants rates up … and the likelihood is you’re going to get the same market share…”
The CMA’s campaign will target firms via posts on social media sites, and radio and digital display advertising. The campaign encourages people to visit the CMA’s designated ‘Cheating or Competing?’ page which features videos, short guides and case studies to explain what business cartels are and how people can report them.
