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‘You can’t draw a line between cover pricing and compensation’

CN's deputy news editor Alasdair Reisner talks to the mastermind behind the OFT investigation, its head of cartels Simon Williams

Q:How did you put together your case against the industry?

A: It has been carried out through a combination of surprise inspections – dawn raids – and gathering information from those firms that applied through the leniency programme.

We got a large amount of information that way, interviewing 200 to 300 witnesses. We do also have powers to check phone records and carry out covert surveillance but we did not require them so much in this case. The vast majority of information came from the raids and interviews.

Q:Isn’t there a danger that people who have come forward for leniency will just say whatever they think you want to hear in order to reduce their fines? Are their claims reliable as evidence?

A: There is no incentive for people to admit to things that they have not been involved in. As far as talking about their competitors, we would want to see some corresponding evidence to substantiate claims they make. A leniency candidate may have paperwork or emails that back up these claims. We are looking to build up a case in the statement of objections that is robust.

Q: Are you confident that you have built up a robust case against all the firms that you have accused?

A: It is robust in so far as it meets the requirements of the test that we must apply. That is not to say that when parties present their response to the claims that we will not change our view

Q: How long will firms have to provide their response?

A: We have given 10 weeks to get back to us with written responses and firms are also entitled to give oral responses. We have suggested that they take legal advice as to how to get the best out of the procedures. The 10 weeks would normally be sufficient so we would not look to extend that.

Q: What happens then?

A: Once we have received all the evidence from all parties we will then take advice as to whether it is robust to allow us to deliver our infringement decisions. I am looking forward to being able to do that so people will be able to see the kind of behaviour we are talking about.

Q: Will the companies themselves have any control over the amount they are then fined?

A: Companies will be able to give representations as to what they feel should be the correct level of fines should the allegations be proved. We will also look at the results of previous OFT investigations.

We might take the view that in order to provide deterrence the fines should be greater. Our penalty calculation provides the ability to increase the fine if we think the figure that we have produced would not provide sufficient deterrent.

It may well be that we apply that here although I must stress that no decision has been taken on this. Whatever fines we do decide on need to be proportionate.

Q: Are you looking to wrap this up quickly or do you see this as a showcase that you are happy to let run on as a constant reminder to firms not to get involved in such behaviour in the future?

A: The investigation will follow the usual course of previous OFT inquiries. Because there are so many firms involved it may take some time. It is unlikely that we would see something happen in terms of publication of the statement of infringement until sometime next year.

Q: Do you think this will change the industry?

A: I hope that it will spread a message far and wide that whatever the historical roots of the collusion in question such as cover pricing, the fact remains that it is illegal. There are no ifs and no buts.

Q: You have the ability to take criminal action against firms. Do you think you will?

A: We reserve the right to use criminal power in investigations but I can say that the 112 firms will not face criminal charges for their behaviour on the 240 contracts in question.

Q: What happens in the cases of the 1000s of other suspicious tenders that your investigations found but that you did not have the resources to go look at in more depth. Could you return to them?

A: It is true that we uncovered evidence of bid rigging activity by more companies on more contracts. But I do not envisage that we will go back in the future to reinvestigate them and take further action.

Q: Are you concerned that if named firms later prove to be innocent they may take libel action against the OFT?

A: I think that is nonsense. If someone is charged by the police the police names them, even if they are subsequently found to have done nothing wrong. Provided that we make it clear, as we did, that these are just accusations, if we do then drop a case no party should have any basis to complain.

Q: Why did you take the decision to name the firms? Wouldn’t have been better to wait until a decision had been made over who was and who was not guilty?

A: We have to name the firms in the Statement of Objections. Some of those firms are listed so in order to prevent false markets being created those parties would need to be named. If we had named some but not all that would have been a problem

Q: But isn’t there a danger that clients may blacklist firms that later prove to have done nothing wrong?

A: One of the points that we have stressed is that procurers should think very carefully before taking action against the firms. They should exercise great restraint because an accusation is just that. My personal viewpoint is that anyone taking action while the allegations are unproven would be premature and precipitous.

There are 37 firms that have been involved in the leniency programme. It works because it makes it easier to unearth cartels because you know that someone else in the cartel might go for leniency.

What would undermine that is if firms that have applied for leniency get blacklisted. Ironically because of the steps that they have to take as a result of joining the leniency programme are now likely to be amongst the best in the industry in terms of avoiding anti-competitive behaviour.

Q: Are you troubled by some of the more sensationalised reporting of the case?

A: Some quarters have chosen to focus on a more sensationalist agenda but the messages we put out were measured and proportionate. If you want your enforcement to deliver an impact you will not maximise that by secretly releasing the Statement of Objections. We want the message to go to the whole industry.

Q: Isn’t this all just about cover-bidding. Its illegal but who does it really hurt?

A: I’d like to take this opportunity to say that I don’t believe you can draw a clear line of distinction between cover pricing and compensation payments in their seriousness.

If you had a situation where three out of four bidders cover priced leaving one to win the work that would be more serious than where there were six bidders and one was paid a compensation payment. Bid-rigging is a continuous spectrum that is infinitely varied.