UK Price fixing fines reduced

By Helen Wright14 March 2011

The UK Competition Appeal Tribunal has reduced fines imposed on Kier Group and five other construction companies accused of bid rigging after ruling that the original penalties were "excessive".

The UK Office of Fair Trading (OFT) had originally fined the six appellants £ 42 million (€ 48 million), including a fine of £ 17,9 million (€ 20,6 million) against Kier Group, but the tribunal ruled on 11 March to cut the total by £ 37 million (€ 42,6 million).

Kier's penalty saw the largest reduction and now stands at £ 1,7 million (€ 1,9 million) on appeal, while contractor Ballast had its fine reduced to £ 500000 (€ 577000) from £ 8,3 million (€ 9,6 million), and Bowmer and Kirkland saw its original penalty of £7,6 million (€ 8,8 million) reduced to £ 1,5 million (€ 1,7 million).

Fellow contractor John Sisk & Son's original fine of £ 6,2 million (€ 7,1 million) was reduced to £ 36000 (€ 41500), while Corringway Conclusions' penalty was cut to £ 119000 (€ 137000) from £ 770000 (€ 888000), and Thomas Vale's penalty was reduced to £ 170000 (€ 196000) from £ 1 million (€ 1,1 million).

The companies had admitted to cover pricing - a process which involves deliberately submitting higher tenders with the aim of remaining on the client's tender list for future contracts instead of winning the contract being tendered.

But Kier and the other contractors argued that the OFT had failed to account for their low profit margins or early admission of bid rigging when imposing the high penalties.

And the appeal tribunal agreed, ruling, "The penalties imposed by the OFT on each of the appellants for 'simple' cover pricing were excessive given the nature of the infringement ... including the fact that the practice was long-standing in the industry and widely regarded as legitimate".

In total, the OFT imposed original penalties of £ 129,2 million (€ 149 million) against 112 construction companies in September 2009, including the UK's two largest contractors, Balfour Beatty and Carillion.

The tribunal must still rule on appeals from 19 other construction companies accused in the case. However, the OFT could still appeal the Court of Appeal rulings if it does not agree with the lower penalties.

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