Competition law compliance: how well prepared is your business?

25/11/2010

By Nick Bromfield, Consultant in Construction & Engineering.

With the risks of infringing competition law ever more serious for businesses and for individuals the OFT’s latest guidance on compliance could not be more timely.

The construction sector in recent years has had its share of issues and difficulties in the competition law area.

In late 2009 the Office of Fair Trading (OFT) concluded its long-running investigation into bid-rigging in the construction industry imposing fines totalling over £129 million on 103 construction firms. 86 of those firms received reductions in their fines because they admitted infringements. 25 firms have since lodged appeals. 

Around the same time the OFT also fined six recruitment agencies a total of over £39 million for price-fixing and collective boycott in the supply of candidates to the construction industry.

Whatever the ins and outs of a particular case, the fact is that the penalties for competition law infringements are damaging not just in financial terms (fines, the cost of legal proceedings and diverted management time) but also in reputational terms with the public and with customers. An infringement finding can also generate a long tail of damages claims from alleged victims.

Cartels are viewed as the most serious infringement of competition law and the OFT has waged a tireless campaign against them. Going hand in hand with the high level of fines on companies and the threat of criminal prosecution of individuals, the OFT’s principal tool for uncovering unlawful cartels has been its leniency programme. The programme encourages ‘whistle-blowing’ by cartel members in exchange for immunity from fines and prosecution for themselves and their employees.

However, away from its enforcement role, the OFT has also been championing education and compliance as a way for companies to protect themselves against the consequences of infringing competition law. It is currently consulting on new draft Guidance aimed both at companies ('How Your Business Can Achieve Compliance') and at individual company directors ('Company Directors and Competition Law').

Guidance for companies

The guidance for companies, derived from a survey to which numerous businesses contributed, sets out a recommended risk-based, four-step process for introducing a culture of compliance within a business, including endorsement for practical compliance measures that a company might undertake in terms of training and policy.

Guidance for directors

The guidance for company directors explains the level of understanding of competition law that directors are expected to have as well as steps that they should be taking to detect and prevent breaches of the law. The backdrop to this is the OFT’s stated intent to make more use of Director Disqualification Orders to deter anti-competitive behaviour, not just against directors who actively participate in unlawful behaviour but also against those who ought to have known or against those who might be said to have turned a blind eye.

Time for a review?

With competition law occupying a higher and higher position among compliance priorities, the latest OFT guidance offers an opportune moment for businesses to consider or review their own internal compliance procedures and training. TSP’s experienced competition law team is well placed to advise businesses in the construction sector on all questions relating to compliance with the law, introduction or review of compliance manuals and programmes, and all associated training.