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Cartels squeeze out small fry

Price fxing and collusion hurt a third of smaller contractors but widespread awareness fails to prompt more reporting

MORE than one in five small contractors is being squeezed out of entering new markets by anti-competitive practices.

Research by cartel-busters at the Office of Fair Trading showed that 21 per cent of small and medium sized construction companies feel they cannot compete freely and fairly for new contracts.

Construction was among the hardest hit sectors according to the survey, which found that more than a third of smaller contractors are harmed by price fixing and collusion to set tender prices.

The OFT said 40 per cent of construction companies are aware of anticompetitive practices going on.

But despite the high levels of collusive behaviour, only 23 per cent of companies said they would report price-fixing agreements between competitors and only 13 per cent would repor t a larger competitor trying to push them out of the market.

OFT chairman Sir John Vickers said: 'Small and medium sized enterprises have rights and obligations under competition law and can work more with the OFT to identify and stop anti-competitive behaviour.

'We must ensure that SMEs are informed about ? and in turn inform ? our work.' Professor David Storey, director of the centre for SMEs at Warwick Business School, said: 'What is interesting is that even when they experience anti-competitive practices, the reaction of the small firm owner is to soldier on without turning to the authorities.

'But using their rights under competition laws they can level the playing field to give them a better chance to beat the competition.' Construction is a target area for OFT investigators who believe cartels and bid rigging are rife in the sector.

One subcontractor said: 'Everyone knows it goes on but nobody wants to rock the boat. A lot of contracts are carved up among favourite firms and you always see the same contractors working together, so it's difficult for new companies to break into that.

'You often get the feeling work is stitched up from the start and it's all a bit cosy for comfort. Hopefully the OFT means what is says and they will start doing something about it.'