The Office of Fair Trading has found that four companies unlawfully conspired to rig bids for contracts to install access-control and alarm systems. All 65 victims were retirement or care homes.
In each of the 65 cases, only two companies bid for the work; Cirrus Communication Systems and one of the other three cartelists; Glyn Jackson Communications, Peter O’Rourke Electrical and Owens Installations.
Cirrus and its competitor colluded in the setting of their prices in response to the tender, with Cirrus submitting the lower bid. The OFT believes that the other companies were compensated in subcontracts from Cirrus.
Care homes can check whether they were victims, as the rigged tenders are listed from page 76 to 234 of the OFT’s report. The report is dated 6 December 2013, but it was confidential until recently.
Cirrus may have instigated the cartel, and it may have been the only company involved in all unlawful tenders, but it was the only company that the OFT excused from a financial penalty.
Cartels are secret by their nature, so the OFT is heavily dependent on whistleblowers coming forward in exchange for leniency. In this case, Cirrus blew the whistle.
Had Cirrus not been immune, its fine would probably have been considerably larger than those imposed on the three smaller companies; £35,700 on Glyn Jackson, £15,933 on Peter O’Rourke and £1,777 on Owens.
Any care home that was a victim of the cartel can sue Cirrus for damages in a “follow-on” action. The OFT’s decision is binding on the Courts, so any trial could jump straight to the question of what damage was caused. That said, the total value of Cirrus’s bids across the 65 contracts was around 1.4m, so it is likely that only a collective action by the care homes would be viable.
Collective actions – specifically for competition law infringement – are being legislated for in the Consumer Rights Bill which is currently working its way through Parliament. The intention of the Bill is to take the weight off the shoulders of regulators like the OFT by introducing a system such as that in the United States where antitrust actions by victims are commonplace.
As well as collective actions, the Bill proposes the introduction of a fast-track for small businesses to bring individual competition law claims cost-effectively. However, in this case, the prices paid for the access and alarm systems were mainly between £20,000 and £30,000, so any overcharge by Cirrus may be too small to justify individual action even on the fast-track, once it is established.
Coincidentally, on 20 March, the OFT issued a decision concerning another cartel specifically aimed at care homes. It found that various companies including Lloyds Pharmacy infringed competition law by entering into a market sharing agreement in relation to the supply of prescription medicines. In this case it was Lloyds who blew the whistle, thereby avoiding a penalty. However full details are not yet known as the OFT’s report is still confidential.