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OFT inquiry: UKCG and NFB launch new code of conduct

Firms urged to sign competition Code of Conduct to show industry has ‘understood OFT’s message’

A new code of conduct that demands UK construction companies meet the “highest standards of competition law compliance” will today be unveiled by the National Federation of Builders and the UK Contractors Group.

The code, launched through Construction News, was developed jointly by the bodies to promote compliance with local and EU competition laws.

The document has been drawn up following the Office of Fair Trading’s probe into cover pricing activities; an investigation that grew into one of the largest ever undertaken by the competition watchdog.

It is hoped the new code will be embraced by firms of all sizes, with the UKCG’s 25 members having agreed to sign on and the NFB - which represents1,500 small and medium sized companies across England and Wales - making the code a mandatory part of its membership.

The Electrical Contractors’ Association and Federation of Master Builders have also expressed their support.

Last April, 112 construction companies were accused of anti-competitive behaviour. Allegations were primarily of cover pricing, where contractors submit a fake bid for work they don’t want to win in order to keep a good relationship with their clients. Nine firms, however, were accused of making “compensation payments” to unsuccessful tenderers.

An announcement on the penalties to be handed down to those investigated by the regulator is expected to be made next month.
The code aims to set out standards that should be met in future by the industry, which has also this year had its named publicly tarred through its involvement with the Consulting Association blacklist investigation.

It states: “Construction companies must not restrain competition amongst themselves.

“The industry agrees at all times to commit to ensuring the highest standards of competition law compliance… and must not exchange competitively sensitive information or engage in discussions that may lead to the co-ordination of competitive behaviour.”

UKCG director Stephen Ratcliffe said the code was “not merely a statement of high level principles”.

“On the contrary, it has real substance,” he said.

“All UKCG members have individual competition law compliance regimes within their businesses which ensure they are able to implement the code’s principles.

“It also helps to repair the industry’s reputation.”

While the code also highlights the need for individual internal compliance programmes, the likes of which have already been established by the industry’s biggest players in light of the cover pricing investigation, it will also be backed up by guidance and training.
It is hoped this will help the significant number of smaller firms that may not have the resources to put rigorous policies in place. More than 170,000 companies currently operate in the construction industry.

NFB chief executive Julia Evans said the code was “an effective and visible way of demonstrating that the industry has understood the OFT’s message”.

She added: “It is a necessary foundation upon which confidence in our sector can be restored.”

The decision on fines had been expected to be handed down earlier this year, however the announcement was delayed by the complexities of the major investigation.

It was thought there could be further delays following a challenge by residential developer Crest Nicholson, but the High Court last month ruled its fast track offer process offered to firm’s involved was fair and that the regulator was “entitled to adopt the approach it did”.

It ruled only Crest, and no other companies, had been treated unfairly meaning the OFT can move forward with finalising its fines.
The court did, however, ask the OFT to consider giving Crest a “discount” on its penalty for failing to allow it the same opportunity to accept a fast track offer.

Under UK law the OFT can fine firms up to 10 per cent of their annual turnover for breaches of the 1998 Competition Act.

Other penalties can include criminal prosecution - up to five years’ in prison - and director disqualification of up to 15 years.