Clamping down on cartels will speed up recovery

Juliette Enser is the senior director of cartels at the Competition and Markets Authority (CMA)

Few industries are as crucial to a dynamic UK economy as construction, which is one of the reasons why the CMA has taken strong action to root out rogue cartels from the sector. With infrastructure spending set to increase as we emerge from the COVID-19 pandemic, it is more important than ever that we support businesses that stick to the rules, and work together to deal with the ones that don’t.

Over a quarter of construction is driven by the public sector and central government is the biggest single customer for businesses in the sector. Clearly, no firm should be able to win important contracts through anti-competitive or illegal activity.

"We now actively consider director disqualifications in all cartel cases, which may come as a surprise"

When businesses collude to fix prices, rig bids for contracts or illegally share a market for their own gain, they rip off customers, often forcing them to pay higher prices for poorer-quality products and services. They also harm the honest businesses in the sector, which are working hard to innovate and succeed in challenging economic times.

The consequences of breaking the law can be serious. Since 2015, the CMA has issued fines of £67m across five separate cartel cases. These involved concrete drainage, groundworks, office fit-out services, galvanised steel tanks and roofing materials.

Alongside these large fines, 11 company directors have been disqualified due to their actions in these cartel cases. Two directors of a concrete drainage company were disqualified for 11 and 12 years, the longest period for any director disqualification secured by the CMA to date, and their firm was fined £25m. There have also been two criminal convictions, both resulting in prison sentences.

Reporting wrongdoing

We now actively consider director disqualifications in all cartel cases, which may come as a surprise. Our own recent research found almost a third of senior sales staff working in construction (31 per cent) were not aware that a company director could be disqualified for breaking competition law. That should serve as a reminder that business leaders have a responsibility to stay informed about what is happening in the companies they govern, and to lead by example.

Cases often come to our attention when one member of a cartel confesses to wrongdoing. By being the first to report to us, a business can benefit from our leniency programme, avoiding fines and director disqualifications, provided it co-operates fully with our investigation.  We have also made it easier for people to report suspect activity to us via our website.

However, this isn’t the only way we uncover cartels. We have strong powers of investigation, including undertaking searches, under warrant, at company and domestic premises. More than half of our cases are intelligence-led. In our investigations into galvanised steel tanks and concrete drainage, meetings were covertly recorded and used by the CMA as evidence of illegal cartel conduct. We have also streamlined our enforcement processes to conclude cases faster and take on more investigations.

Need for a level playing field

We know that the majority of businesses want to do the right thing. Our research revealed that 92 per cent of construction businesses agreed that it is important to comply with the law, and 95 per cent agreed that a level playing field is necessary for construction businesses to compete fairly, and to succeed.

So, in addition to tackling those that do wrong, we want to support the vast majority in the construction industry that are working within the law to build their businesses and grow the economy.

That is why we are publishing new case studies as part of our Cheating or Competing campaign, to lift the lid on where these businesses went wrong. We believe case studies can help the wider industry to avoid making similar mistakes.

Instead of just cracking down on offending firms, we hope that by continuing to support competitive construction businesses and helping these businesses understand the rules, the industry will thrive when it is needed most.