£60m fines and director bans for contractors after demolition bid-rigging probe
Ten demolition contractors have been hit with fines totalling £59.3m for their involvement in bid-rigging.
The Competition and Markets Authority (CMA) ruled in June last year that the firms, which include Keltbray, McGee and Erith, were all colluding on prices through “illegal cartel agreements” when submitting bids for contracts.
The CMA previously ruled that, rather than being involved in competitive tenders, the 10 firms colluded on prices when submitting bids for work on 19 projects, worth more than £150m in total, for clients including the Metropolitan Police, the University of Oxford and Selfridges.
The firms were all involved in at least one instance of bid-rigging in the demolition or asbestos-removal sectors between January 2013 and June 2018, the CMA ruled. They did this by submitting bids that were “deliberately priced” to lose the tender – meaning clients could end up paying higher prices or receiving lower-quality services.
Erith, which had a turnover of £175.7m in its most recent accounts, was landed with a £17.6m fine, while £197.3m-turnover firm Keltbray must pay £16.0m in total. The CMA has the power to fine companies up to 10 per cent of their global turnover.
The full fines are:
- Erith – £17.6m
- Keltbray – £16.0m
- Scudder (now part of Carey) – £8.3m
- JF Hunt – £5.6m
- McGee – £3.8m
- Brown and Mason – £2.4m
- Squibb – £2.0m
- Cantillon (now owned by Morrisroe) – £1.9m
- DSM – £1.4m
- Clifford Devlin – £423,600
The CMA handed reduced fines to eight of the firms after they admitted last June their involvement in the bid-rigging. But Erith and Squibb did not admit involvement in the scandal, and so did not have their fines reduced.
The firms involved can appeal the fines imposed by the CMA.
Cantillon managing director Paul Cluskey is among three directors who were disqualified from 2 February this year for their part in the scandal. His disqualification lasts for four years and six months, while his predecessor Michael Cantillon, who stepped aside for him in December 2014, will be unable to accept any directorships for seven years and six months.
Erith’s former managing director David Darsey is the third director who has been disqualified, for five years and 10 months. He is also a former president of the National Federation of Demolition Contractors (NFDC).
The directors’ disqualification periods are lower than they could have been because they voluntarily stepped aside from their former roles.
CMA executive director for enforcement Michael Grenfell said: “The construction sector is key to our country’s prosperity, so we want to see a competitive marketplace delivering value, innovation and quality.
“Today’s significant fines show that the CMA continues to crack down on illegal cartel behaviour. It should serve as a clear warning: the CMA will not tolerate unlawful conduct which weakens competition and keeps prices up at the expense of businesses and taxpayers.
“We have also secured the disqualification of certain company directors involved. Company directors must understand that they have personal responsibility for ensuring that their companies comply with competition law, and that disqualification may follow if they fail to do so.”
Keltbray chief executive Darren James said: “We strongly condemn anti-competitive practices and treat all matters that reflect on our compliance with statutory obligations with the utmost gravity.”
He added Keltbray had “cooperated fully” with the CMA throughout the inquiry.
“Keltbray today is a very different organisation, with the necessary controls and independent oversight in place, following the early adoption of the Wates Corporate Governance Principles for large, private companies, to ensure these isolated events could never reoccur.
“The reported CMA penalty is based on Keltbray’s total group turnover, rather than the actual level of culpability relevant to the wound down subsidiary. Keltbray is a large, highly diversified business, with demolition representing a small proportion of total revenues. Keltbray will be appealing today’s penalty decision.”