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Update: No blacklisting of construction firms

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Update: No blacklisting of construction firms

Tue, 22 September 2009
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Update: No blacklisting of construction firms
Balfour Beatty Quote more

Price: 266.90

Chg: -7.40

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Date: 17:04

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Price: 19,751.24 Chg: -12.70 Chg %: -0.06% Date: 17:14

More than a hundred of the UK's leading building contractors including Balfour Beatty, Kier and Carillion were landed with fines today by the Office of Fair Trading (OFT) after a four-year investigation into collusion and price-fixing in the building industry.

The OFT stopped short of putting the offending companies on a black list, however. According to reports, business minister Lord Mandelson has contacted construction companies to outline the government’s position which is that the offending companies should not be penalised in future when bidding public sector contracts.

Balfour Beatty was fined £5.2m and Carillion £5.3m, but Kier's fine was especially heavy at £17.9m. In total, the OFT fined 103 firms a total of £129.5m following the investigation that looked into allegations of price rigging in building contracts worth as much as £3bn.

There will be some relief, however, that the fines were not worse. The OFT has the power to impose fines of up to 10% of turnover against firms operating a cartel, but today's fine is about 1-2% of sales analysts estimate.

The OFT reportedly had been under intense pressure to reduce the penalties because of the damage the industry has suffered in the recession. Industry pundits have suggested that had maximum fines been imposed more than 50 companies could have gone to the wall.

Eighty-six out of the 103 firms received reductions in their penalties because they admitted their involvement in cover pricing prior to today's decision, the OFT said.

The OFT has also informed nine companies originally listed that it will not pursue allegations of bid-rigging against them as it considers it has insufficient evidence to proceed to an infringement finding.

Two of the fined firms rushed out statements to emphasise that transgressions by their subsidiaries took place under previous ownership. Balfour Beatty’s Mansell subsidiary and Carillion’s John Mowlem unit were both independent companies when they broke the rules.

Galliford Try, meanwhile, said that the transgressions for which it was fined took place in building businesses in England that have either since been closed down or restructured.

Kier, the company hit the hardest, confirmed that the OFT found its Kier Regional unit breached the Competition Act 1998 in respect of three tenders between 2001 and 2005, but stressed that 'at no point has the OFT alleged or found that Kier paid or received any compensation payments.'