Cartels are by their nature secretive so few outside the group fixing prices or rigging bids or other anti competitive behaviour know what is going on until it hits the headlines. Yet few in the industry are surprised when they hear about prosecutions; this behaviour seems to have always been resignedly regarded as ‘one of those things’, and endemic.
Despite high profile prosecutions and large fines the Competition and Markets Authority has the firm view that anti competitive practices are far from having been stamped out in the industry. Any doubts held about the fact that the CMA has a vigilant eye on construction should have been erased in the speech by Speech by Juliette Enser, Executive Director for Competition Enforcement, delivered at a London conference in May.
Ms Enser told the audience that the CMA has a strong track record in taking cases that serve to protect the public purse. She highlighted cartel investigations into concrete drainage products used in road construction, and water storage tanks used by schools and hospitals.
Ms Enser wasn’t merely taking the opportunity to crow about the CMA’s track record. She warned: “And we intend to build on our track record with a focus on public procurement.”
She added: “It is well-known that public procurement is particularly vulnerable to bid-rigging and that bid-rigging, where present, can substantially increase prices: research suggests that this can be by 20% or more.”
Ms Enser said this accords with evidence from CMA cases showing that bid-rigging can be extremely lucrative, with some of the parties to its recent Demolition sector investigation for example having ‘compensated’ each other for deliberately losing tenders with substantial payments.
She warned: “So we intend to intensify our work in this area. For example, by investing further in our detection tools, including – where we can access the right data – using data analytics (including AI) tools to identify suspicious activity.”
And public procurement, while a priority, will not be the only area of work CMA tackles in the short to medium term. For examples she cited current investigations in housebuilding.
Ms Enser stressed that the CMA is “generally keen” to hear from businesses facing barriers to entry or expansion – which could involve cartels – that competition law can help them solve, particularly in areas that the government has identified as a focus in its industrial strategy green paper in October last year, the final details of which are expected along with the spending review in June.
The CMA is no toothless overseer of corporate conduct. Its investigations have resulted in fines of almost £650 million over the last five years. It has also used its director disqualification powers to prevent 29 individuals from acting as directors or being involved in the management of a company under the disqualification regime.
The Procurement Act 2023 now means that those found to have committed breaches of competition law also face an increased risk of being excluded from future public tenders. Ms Enser highlighted what she said is the new risk facing cartelists arising from the debarment regime introduced by the Procurement Act, which came into force in February. This will see offenders face the possibility of inclusion in a central debarment register and exclusion from future public tenders for a period of up to five years.
Nick Barrett
Editor