Today the Competition Appeal Tribunal (CAT) has handed down judgment in the Office of Fair Trading’s biggest-ever case, which concerned ‘cover pricing’ in the construction industry.
Representing Thomas Vale before the CAT Tribunal, Wragge & Co antitrust partner Bernardine Adkins succeeded in reducing its fine to £171,000 from an initial penalty of £2 million imposed by the Office of Fair Trading (OFT). Rather than use a QC, Thomas Vale chose Bernardine Adkins to do the advocacy. The case is unique in that this is the first instance of a solicitor taking a cartel case all the way through from the initial dawn raid; a successful leniency application, to representing the client in the tribunal in challenging the size of the penalty.
The decision forms part of a wider case against the OFT’s proposed fines totalling nearly £130 million for 103 construction companies for unlawful colluding on building tenders (cover pricing). Thomas Vale was one of 24 organisations appealing the decision on the grounds that the penalty was excessive and disproportionate.
Bernardine Adkins said: “Our argument, acknowledged in the CAT’s judgment, was based on fairness – challenging the level of the penalty rather than questioning the OFT’s entitlement to impose a penalty at all. A high-profile, landmark case, it demanded expert litigation skills and antitrust expertise to achieve this hugely significant result for our client. The ruling given in the judgment regarding penalty levels is likely to influence how the OFT imposes future fines.”
This case changes the position on fines imposed by the OFT as previously understood. It remains the case that any penalty imposed by the OFT can be up to 10% of a company’s group annual worldwide turnover. In its latest judgment, CAT recommends a starting point of 3.5% for ‘simple’ cover pricing. Cover pricing occurs where a company wants to remain on tender lists, but believes it does not have the resources to price the job properly or complete a particular project. It therefore asks a fellow bidder to suggest a so called ‘cover price’ that is deliberately too high to win the contract.
Wragge & Co has advised Midlands-based contractor Thomas Vale on legal issues for more than 20 years. Supporting Bernardine Adkins was associate Sam Beighton and Kirsty Brown. The team worked closely with finance director David Newcombe and chairman Mike Wallis.
Wragge & Co’s Antitrust team advises on competition matters including the full range of EU regulatory, trade law issues, state aid and public procurement. It also regularly supports merger and acquisitions work. The team’s client list includes Aston Martin, Birds Eye, Cadbury plc, Premier Foods, Superdrug and HJ Heinz.
Its specialist Dawn Raid Action team offers clients immediate support in the event of an OFT or European Commission dawn raid. And before the competition authorities strike, its antitrust and litigation experts offer comprehensive training to ensure clients are prepared for the realities of a dawn raid. It also offers a bespoke online compliance training tool, Straight & Narrow.
