Judgment on six 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 each of 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 £5.5m were imposed on the Appellants.
The Appellants raised a wide range of challenges to the penalties imposed by the OFT in the Decision. The Tribunal upheld certain of these challenges, in particular concluding 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 selection of infringements in the Decision was not arbitrary, and the OFT was entitled to impose a separate fine for each infringement.
- The OFT’s application of a “minimum deterrence threshold” to adjust the penalties on certain of the Appellants at Step 3 of the penalty calculation was wrong in principle and inconsistent with the OFT’s published guidance.
- The OFT was correct to include both tendered and non-tendered work should be included in the same relevant market. However, the OFT failed sufficiently to take into account the particular circumstances of the industry, including the prevalent low margins on turnover, and the specific circumstances of these Appellants (some of whom made claims to financial hardship) in calculating the penalties imposed in the Decision, and failed to ensure that the ultimate penalties imposed were proportionate.
Having resolved these and other challenges raised by the Appellants, the Tribunal reassessed the penalties imposed on the Appellants as follows:
- Francis Construction Limited and Barrett Estate Services: the original penalty of £530,238 was varied to £169,575.
- GAJ Construction Limited and GAJ (Holdings) Limited: the original penalty of £109,683 was varied to £42,750.
- Allenbuild Limited and Renew Holdings plc: the original penalty of £3,547,931 was varied to £926,250.
- Robert Woodhead Limited and Robert Woodhead Holdings Limited: the original penalty of £411,595 was varied to £151,725.
- J H Hallam (Contracts) Limited and J H Hallam (R&J) Limited: the original penalty of £359,588 was varied to £99,000.
- Hobson and Porter Limited: the original penalty of £547,507 was varied to £123,750.
