Judgment on two appeals against a decision of the Office of Fair Trading dated 21 September 2009 entitled “Bid rigging in the construction industry in England” (“the Decision”). In the Decision the OFT found that the Appellants had engaged in cover pricing contrary to the Chapter I prohibition contained in section 2(1) of the Competition Act 1998. The OFT imposed penalties totalling £129.2m, of which a penalty of £5,188,846 was imposed on the Appellants.
Both of the Appellants appealed the Decision as regards the penalty imposed on them. ISG Pearce additionally appealed the Decision as regards its liability for Infringement 75, submitting that the OFT had breached the principle of equal treatment by addressing the Decision to ISG Pearce, but not to other intermediate parent companies.
The Tribunal dismissed ISG Pearce’s appeal on liability, concluding that the OFT was correct to take account of the consequences of an agency agreement between ISG Pearce and its subsidiary, Pearce, when addressing the Decision to ISG Pearce.
As regards the Appellants’ challenge to the penalty imposed on them, the Tribunal concluded that:
- The OFT was wrong to use turnover in the financial year preceding the Decision at Step 1 of the penalty calculation, and should instead have used turnover in the financial year preceding the infringement.
- The OFT’s application of a “minimum deterrence threshold” to adjust the penalties on the Appellants at Step 3 of the penalty calculation was wrong in principle and inconsistent with the OFT’s published guidance.
- Crest Nicholson’s objectively different position from other recipients of the OFT’s “fast track offer” justified a level of discount higher than that afforded to Crest Nicholson in the Decision. However, the OFT was correct not to impute Crest Nicholson’s admission of liability to ISG Pearce, such that a discount awarded to Crest Nicholson could not automatically inure to the benefit of ISG Pearce.
- The ultimate penalty imposed on the Appellants in the Decision was disproportionate and excessive in all the circumstances of the infringement and in light of the Appellants’ own circumstances.
The Tribunal accordingly concluded that the penalty imposed on the Appellants could not stand and should be reassessed. The original penalty of £5,188,846 was varied to £950,000 for which the Appellants are jointly and severally liable, save that Crest Nicholson’s liability for the penalty is reduced by 20%.
