Judgment

Judgment of the Tribunal in the appeal under section 46 of the Competition Act 1998 (“CA 1998”) brought by Keltbray Limited and Keltbray Holdings Limited (together, “Keltbray”) against a decision of the Competition and Markets Authority (“CMA”) in Case 50697 Supply of demolition and related services dated 23 March 2023 (“the Decision”).

 The Decision found that ten undertakings, among them Keltbray, had infringed section 2(1) CA 1998 by participating in "cover bidding". Keltbray had entered into a Settlement Agreement with the CMA in which it admitted liability for eight infringements, and accepted that the CMA would impose a maximum total penalty of £20 million in respect of those infringements, to which a reduction of 20% would be applied in recognition of the procedural efficiencies achieved through settlement.

 Keltbray appealed against the £16 million penalty ultimately imposed on the following bases:

1. Ground 1: the CMA erred by calculating the penalty on the basis of Keltbray's entire market revenues over a broadly defined market, and should instead have used the relevant tender values as the measure of relevant turnover for the purposes of the CMA Guidance as to the Appropriate Amount of a Penalty dated 18 April 2018 (“the Penalty Guidance”).
2.  Ground 2: the CMA erred by including revenues from “Highly Complex Demolition Services” ("HCDS"), which Keltbray submitted was distinct from the "General Demolition Services" ("GDS") market, in its penalty calculation.
3.  Ground 3: the £20 million penalty was excessive in all the circumstances.

 The Tribunal unanimously held:

1. The CMA correctly considered and applied the Penalty Guidance when identifying relevant turnover. There were potential wider effects of the infringing conduct beyond the individual tenders. It was rational and reasonable for the CMA to define the product market in a way that reflected those wider effects, and to calculate relevant turnover accordingly. That was permitted by the Penalty Guidance, and the CMA did not err in failing to exercise its discretion to adopt a different approach, which was not supported by the factual or expert evidence before the Tribunal, nor in law or economic theory. Accordingly, Ground 1 was dismissed.
2. The CMA had a reasonable basis for defining the market as it did. The evidence disclosed no clear distinction between HCDS and GDS projects. Ground 2 was dismissed.
3. The reasons why the figure of £20m was ultimately considered by the CMA to be appropriate were not immediately apparent from the Decision. The Decision did not contain an adequate explanation of how financial indicators informed its assessment of the penalty to be charged, and the CMA paid insufficient regard to Keltbray's low profit margins. The seriousness percentage applied by the CMA for the purposes of the Penalty Guidance was materially high, and the ultimate penalty was reduced. The Tribunal found that a penalty of £18m appropriately reflected the fact that Keltbray was involved in 8 Infringements, and was no less likely to act as a specific deterrent to Keltbray than a penalty of £20m, taking into account all of the financial indicators, and bearing in mind the CMA’s acknowledgement of the low margin nature of the industry.