OFT investigating suspected anti-competitive practices by construction trade association

The Office of Fair Trading (OFT) has stressed that its investigation is at an early stage and has not named the companies, trade association or specific allegations involved. The investigation relates to a suspected breach of both UK and EU competition rules on anti-competitive agreements, such as price-fixing and market sharing.

"This case is at an early stage and no assumption should be made that there has been an infringement of competition law," the OFT said on its case summary page.

Competition law expert Amy Procter of Pinsent Masons, the law firm behind Out-Law.com, said that investigations of this type were usually triggered by complaints from uninvolved companies operating in the sector, or an application for leniency from a party involved.

"Whilst the OFT recognises that trade associations can play a positive role in encouraging business compliance with competition law, they have also been the subject of scrutiny in the past," she said. "This sector is also one with regulatory form."

She added that although the OFT had said that the investigation related to the trade association itself, its members could also come under scrutiny. Trade association members can be found to be in breach of competition law by virtue of the association's activities, or could even be found liable for any breach by the association, she said.

The activities of a trade association can in some circumstances give rise to anti-competitive arrangements or concerted practices. Members could agree anti-competitive conditions between themselves, for example in relation to fees or terms to be offered to customers. The association may issue guidance or recommendations to members on prices, which may be in breach of competition law even where they are not binding.

Trade associations can also act as a 'conduit' to anti-competitive activities, for example by allowing members to exchange commercially sensitive information between themselves in breach of the rules. In 2011, six insurance companies and two IT software and service providers offered commitments to address competition concerns after an investigation into the exchange of pricing information through a data exchange tool.

The investigation is not the first investigation by the OFT into alleged anti-competitive practices involving the construction sector. In 2006, it imposed initial fines of just over £40m on six construction industry recruitment agencies for price-fixing and the collective boycott of a new rival.

According to its website, the OFT intends to make a preliminary decision on whether to pursue the investigation early next year. It will gather information on both a formal and informal basis from the parties under investigation and from third parties between now and June 2013. Parties involved could face fines of up to 10% of their group worldwide turnover if the OFT finds that a breach has taken place.

"Although the case is currently being pursued using the OFT's civil powers, it may prosecute on a criminal basis if evidence of a 'hardcore' breach such as price-fixing is found," Procter said. "Individuals subject to criminal sanctions may face imprisonment for up to five years, and unlimited fines. In addition, if it were the case that a construction company has paid higher fees for the training services as a result of the infringing conduct, damages for actions could be pursued against those involved."