“(1) … agreements between undertakings, decisions by associations of undertakings or concerted practices which – (a) may affect trade within the United Kingdom, and 1 (b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom, are prohibited … (2) Subsection (1) applies, in particular, to agreements, decisions or practices which – (a) directly or indirectly fix purchase or selling prices or any other trading conditions …”
“the tendering process provides for the tenderee to receive independent bids following the acceptance of an invitation to tender, alternatively for the invited tenderer to decline the invitation to bid so that the tenderee has the opportunity to 4 replace that undertaking with another competitor. … The effect of the conduct … was to deprive the tenderee of a similar opportunity. In this respect also the concerted practice has as its object or effect the prevention, restriction or distortion of competition.”
“Elliott House/014031/AJ/NLA/APRIL 02.”
“268. In his statement dated2 September 2003 , Barry Abbott said that Rock's products were not specified in the tender for the Elliott House Car 8 Park. It was a generic specification but he was interested in the contract. Barry Abbott said that Asphaltic had called him but it was not interested in the job because it knew that Rock was in the running for the contract for the Elliott House Car Park. Barry Abbott said that he had given Asphaltic rates to quote for Flexiphalte car park products in the fax dated18 June 2002 , to Joe Kelly. 269. Rock was asked through its solicitors whether faxes that it sent to competitors with figures to use as cover for Rock were sent after prior discussions or speculatively so they were received out of the blue by competitors. The following was said in reply: "According to Mr Abbott, and to the best of his recollection, no faxes were ever sent unsolicited or out of the blue. The faxes were always sent after discussion."”
“ OFT's analysis of the evidence as set out in the Statement of Objections 270. From the evidence contained in the fax dated18 June 2002 , the fact that Asphaltic's tender used the same figures as were in that fax and the statement of Barry Abbott, the OFT is satisfied that there was an agreement and/or concerted practice in breach of the Chapter I prohibition between Rock and Asphaltic to provide non-competitive prices in relation to the tenders submitted for works at the car park at Elliott House. 271. The evidence also demonstrates that Makers must have received a copy of the second "Schedule of Rates" and "Tender Summary" that was sent by Rock to Asphaltic on18 June 2002 , from Rock or Asphaltic, thereby colluding with one or other of them in submitting cover bids to AKS. If Makers had received the "Schedule of Rates" from Rock it would have been after some prior discussion. The OFT has no reason to believe that the same would not have happened if Makers had received it from Asphaltic. The OFT considers that there is no other reasonable and innocent explanation for Makers submitting a tender containing the precise figures that were faxed by Rock to Asphaltic in the second "Schedule of Rates" than that Makers was also involved in collusive tendering. 272. The OFT does not have to decide whether there were two bilateral agreements and/or concerted practices between Rock and Asphaltic and Rock and Makers, or agreements and/or concerted practices between Rock and Asphaltic and Asphaltic and Makers or one trilateral agreement and/or concerted practice between all three of the Parties. There is a strong 9 inference that there was either direct contact between Rock and Makers or indirect contact (via Asphaltic) on prices, both of which are prohibited. The Parties’ representations Asphaltic’s representations 273. Asphaltic states that the allegations against it are “purely based on hearsay, taken from various files of other roofing companies …”
“(1) The Tribunal must determine the appeal on the merits by reference to the grounds of appeal set out in the notice of appeal. (2) The Tribunal may confirm or set aside the decision which is the subject of the appeal, or any part of it, and may-(a) remit the matter to the [OFT], (b) impose or revoke, or vary the amount of, a penalty, … (e) make any other decision which the [OFT] could [it]self have made. (3) Any decision of the Tribunal on an appeal has the same effect, and may be enforced in the same manner, as a decision of the [OFT]. (4) If the Tribunal confirms the decision which is the subject of the appeal it may nevertheless set aside any finding of fact on which the decision was based.”
“117. If and when a matter moves to the judicial stage before this Tribunal, what was previously an administrative procedure, in which the Director combines the rôles of “prosecutor” and “decision maker”, becomes a judicial proceeding. There is, at that stage, no inhibition on the applicant attacking the Decision on any ground he chooses, including new evidence, whether or not that ground or evidence was put before the Director. The Tribunal, for its part, is not limited to 16 the traditional rôle of judicial review but is required by paragraph 3(1) of Schedule 8 of the Act to decide the case “on the merits” and may, if necessary and appropriate, “make any other decision which the Director could have made”: paragraph 3(2)(e). If confirming a decision, the Tribunal may nonetheless set aside a finding of fact by the Director: paragraph 3(4) of Schedule 8. Unlike the normal practice in judicial review proceedings, the Act and the Tribunal Rules envisage that the Tribunal may order the production of documents, hear witnesses and appoint experts (see Schedule 8, paragraph 9 of the Act, and Rule 17 of the Tribunal’s Rules) and may do so even if the evidence was not available to the Director when he took the decision: see Rule 20(2) of the Tribunal’s Rules. … 133. …in principle, the Director should not be permitted to advance a wholly new case at the judicial stage, nor rely on new reasons. To decide otherwise would make the administrative procedure, and the safeguards it provides, largely devoid of purpose; the function of this Tribunal is not to try a wholly new case. If the Director wishes to make a new case, the proper course is for the Director to withdraw the decision and adopt a new decision, or for this Tribunal to remit. 134. However,… it is virtually inevitable that, at the judicial stage, certain aspects of the Decision are explored in more detail than during the administrative procedure and are, in consequence, further elaborated upon by the Director. As already indicated, these are not purely judicial review proceedings. Before this Tribunal, it is the merits of the Decision which are in issue. It may also be appropriate for this Tribunal to receive further evidence and hear witnesses. Under the Act, Parliament appears to have intended that this Tribunal should be equipped to take its own decision, where appropriate, in substitution for that of the Director.”
“EL [one of the OFT’s officials] tells [Mr Bowman] that the Oft [sic] have narrowed their investigation to the Elliott House contract. He asks if there is any communication with Ashphaltic [sic] Roofing or Rock Asphalt Ltd and any emails or faxes? RB replies that any such documents would have been kept in the sub-contractor files. Emails and faxes would be in the contract files but not very well kept. He leaves to search for them.”
“560. The OFT proposes to impose a penalty on the Parties listed at paragraph 4 [which include Makers] in relation to the infringements considered above in respect of which each Party is found to have participated in collusive tendering arrangements. In accordance with section 38(8) of the Act, the OFT will have regard to the guidance on penalties issued under section 38(1) of the Act when setting the amount of the penalty…”
“We continue to examine the documents and we will revert when we have had the opportunity to absorb all the contents. From our initial internal enquiries we refute the allegation that Makers were involved in any collusive practices in connection with any of the matters raised in your documentation.”
“16. … I had a meeting with Rob Bowman and Simon Lamb to discuss the OFT’s Statement of Objections and look again at the documents that the OFT took away with them when they visited us in September 2004. We all tried to come up with an explanation for why the OFT was suggesting that Makers must have received a copy of the Rock schedule of rates and tender summary from Rock or Asphaltic. We did not know why the OFT were suggesting this and thought its suspicions were misconceived. 17. I remember that I had a discussion with Rob Bowman and Simon Lamb about the OFT’s allegations and tried to find what information we could about it. I remember that we found some sort of tender correspondence and costing summaries and I now know that we found letters in relation to tender prices for the concrete repairs element of Elliott House. 4 We discussed where the prices on our tender bid to AKS had come from and I recall discussing Asphaltic and that it had provided Makers with a sub-contract price. We were trying to work out what the OFT’s allegations might be, and also what Makers had been trying to achieve in terms of the tender we submitted to AKS. 18. I recall that we discussed whether we had been fed prices in order to keep us out of the tender race and I wondered whether this was an attempt by Rock and Asphaltic to stitch us up because they knew we had alternative technologies that could be offered to AKS which could have given us the edge in winning the tender. 4 This refers to another aspect of the Elliott House project where, at the beginning of July 2002 Makers was asked by Asphaltic to provide a sub contract quote for some concrete repair work. 25 19. However, we were still very unclear about what might have happened and we had no firm evidence of our suspicion that maybe Rock and Asphaltic were trying to keep us out of the competition. This is why I did not put these details in my letter to the OFT. I also firmly believed that we did not have a case to answer to the OFT and that my letter would explain this.”
“We have carried out our internal review and as a result we are confident that there have been no collusive practices carried out in the asphalt / roofing market sector by Makers UK. The substantive evidence that your investigation reveals against Makers is our bill of quantities used in the tender was found in a competitors files, which after investigation can not be accounted for as a number of employees who were involved in this tender have now left the Company. Possible explanations for this may be the document was the subject of a sub contract enquiry to a competitor on the basis that we were contemplating not tendering for the works or we wanted a sub contract price for that part of the works in which Makers UK did not have a strong expertise. We again reiterate that Makers UK refute any allegation of wrong doing or entering into collusive practices.”
“I think that it did start to dawn on us how serious this issue was, and we were very, very busy at the time. The company in the previous year had just posted a very large loss. It was on its third Managing Director in as many years. It was a very hectic time. The business was being put back on the rails. We had a limited amount of time to look at this – again, naively and inadvisedly – which we thought was something that would go away, because we hadn’t been a part of it. I think as the whole thing went on we realised how serious it was, and the deeper we dug, the more information we unearthed.”
“20 . During the Makers internal adjudication process the Asphaltic quote was clearly the lowest available quote. However we were uneasy about using Asphaltic’s prices for the whole job as we were unsure of Asphaltic’s status in the tendering process. As as result it was decided that there was to be no mark up by us on the prices when we submitted it to AKS. I believe Asphaltic would have expected us to do this.[ 5 ] It is possible that Asphaltic may have been trying to give us a price that would not win the contract. In the event it did give us a realistic price. 21 . Our strategy was to put in a bid that would enable us to get to the table to meet the client and negotiate alternative specifications that Makers could do itself using our […] systems and technologies. We did not offer an alternative specification during the tendering process because we wanted to present these alternative technologies directly to the client where their full benefit could be explained. These technologies are in direct competition to asphalt, but would have provided us with an opportunity to give the client cost savings and for Makers to realize a margin.”
“15. … I recall that there was a particular type of beam susceptible to water and there was an expansion joint at the top of the ramp not located in the correct position. I recall advising that it needed to be relocated in order to perform correctly and generally on concrete repairs, also how Makers could handle the job. I was aiming to demonstrate Makers’ additional capability and trying to make the project more tailored to those capabilities and our more specific business of overcoating asphalt car decks. 16. On23 April 2002 I had a meeting/ or conversation with Audley Johnson regarding the roof membrane. I suggested it would be possible to use an alternative (Makers) system but I was informed that the building owner wanted asphalt. I understood that it would be difficult to persuade the client to change its mind. It was my impression that the car park owner was driving the Elliott House project and that he wanted value for money. However, I introduced a tile we had used on a previous project in Aldershot that I believed would help with the soundproofing issues at the Elliott House car park. I suggested AKS visit the Aldershot project to see that they thought.”
“Even if Makers’ account of the facts … is accepted, the OFT contends that the proper inference from the totality of the evidence is that Asphaltic and Makers knowingly substituted practical cooperation between them for the risks of competition, with the object and/or effect of influencing Makers’ conduct on the market. Thus, Makers’ bid was the result of improper collusion between Makers 33 and Asphaltic, rather than a legitimate sub-contracting relationship between those parties.”
“64. Article [81] draws a distinction between the concept of ‘concerted practices’ and that of ‘agreements between undertakings’ or of ‘decisions by associations of undertakings’; the object is to bring within the prohibition of that article a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition. 65. By its very nature, then, a concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants.”
“26. The concept of a ‘concerted practice’ refers to a form of coordination between undertakings, which, without having been taken to the stage where an agreement properly so-called has been concluded, knowingly substitutes for the risks of competition practical cooperation between them which leads to conditions of competition which do not correspond to the normal conditions of the market, having regard to the nature of the products, the importance and number of the undertakings as well as the size and nature of the said market. 36 27. Such practical cooperation amounts to a concerted practice, particularly if it enables the persons concerned to consolidate established positions to the detriment of …the freedom of consumers to choose their suppliers. 28. In a case of this kind the question whether there has been a concerted practice can only be properly evaluated if the facts relied on by the Commission are considered not separately but as a whole, after taking into account the characteristics of the market in question. … 173. The criteria of coordination and cooperation laid down by the case-law of the Court, which in no way require the working out of an actual plan, must be understood in the light of the concept inherent in the provisions of the Treaty relating to competition that each economic operator must determine independently the policy which he intends to adopt on the common market including the choice of the persons and undertakings to which he makes offers or sells.” 174. Although it is correct to say that this requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors, it does however strictly preclude any direct or indirect contact between such operators, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market. 175. The documents quoted show that the applicants contacted each other and that they in fact pursued the aim of removing in advance any uncertainty as to the future conduct of their competitors.”
“207. The foregoing principles are applicable generally to concerted practices. Their specific application to a tendering process involving cover bidding has not, however, been the subject of Community case law or Commission decisional practice. Before considering their application to the present facts it is important to consider the nature of a tendering process. Nature of tendering process 208. The essential feature of a tendering process conducted by a local authority is the expectation on the part of the authority that it will receive, as a response to its tender, a number of independently articulated bids formulated by contractors wholly independent of each other. A tendering process is designed to produce competition in a very structured way. 209. The importance of the independent preparation of bids is sometimes recognised in tender documentation by imposing a requirement on the tenderers to certify that they have not had any contact with each other in the preparation of their bids. This is important from the standpoint of the customer, since the 39 tendering process is designed to identify the contractor that is prepared to make the most cost-effective bid. The competitive tendering process may be interfered with if the tenders submitted are not the result of individual economic calculation but of knowledge of the tenders by other participants or concertation between participants. Such behaviour by undertakings leads to conditions of competition which do not correspond to the normal conditions of the market. 210. When the tendering process is selective rather than open to all potential bidders, the loss of independence through knowledge of the intentions of other selected bidders can have an even greater distorting effect on the tendering process. In a selective tender process the contractors invited to tender will in general be those considered most likely to have the required specialist skills. The Tribunal understands that selective tendering is commonly used by local authorities (and others commissioning construction and maintenance work). Selective tendering processes ensure that the workload involved in analysing the various bids submitted can be kept within manageable bounds. 211. Accordingly, since the selective tendering process by its nature has a restricted number of bidders, any interference with the selected bidders’ independence can result in significant distortions of competition. 212. The Tribunal notes that the Form of Tender used for the Dudley Contracts requires the tenderer to certify that “the amount of this tender has not been communicated to any other person or adjusted in accordance with any agreement or arrangement with any other person” and the invitation to tender states that “Any tender not complying with these requirements will be rejected.”
“Policy objectives 1.4 The twin objectives of the OFT's policy on financial penalties are: • to impose penalties on infringing undertakings which reflect the seriousness of the infringement, and • to ensure that the threat of penalties will deter undertakings from engaging in anti-competitive practices. The OFT has a discretion to impose financial penalties and intends, where appropriate, to impose financial penalties which are severe, in particular in respect of agreements between undertakings which fix prices or share markets and other cartel activities, and serious abuses of a dominant position. The OFT considers that these are among the most serious infringements of competition law. The deterrent is aimed at other undertakings which might be considering activities contrary to Article 81, Article 82, the Chapter I and/or Chapter II prohibition, as well as at the undertakings which are subject to the decision.”
“We observe, first, that the Guidance is what it says, namely guidance, and is not to be construed as if it were a statute. Secondly, as we have already held, the OFT has a margin of appreciation in applying the Guidance…”
“in our judgment it is implicit in the fact that the Guidance is just that – i.e. guidance, rather than precise statutory rules – that the OFT retains a margin of appreciation, both as to the interpretation of the Guidance, and as to its application in any particular case.”
“497. We observe first, that the Tribunal is not bound by the Director’s Guidance. The Act contains no provision which requires the Tribunal to even have regard to that Guidance. 498. Schedule 8, paragraph 3(2) of the Act, provides that “the tribunal may confirm or set aside the decision which is the subject to the appeal, or any part of it, and may … (b) impose, or revoke, or vary the amount of, a penalty … or (e) make any other decision which the Director could have made.” 499. It follows, in our judgment, that the Tribunal has a full jurisdiction itself to assess the penalty to be imposed, if necessary regardless of the way the Director has approached the matter in application of the Director’s Guidance. Indeed, it seems to us that, in view ofArticle 6(1) of the ECHR , an undertaking penalised by the Director is entitled to have that penalty reviewed ab initio by an impartial and independent tribunal able to take its own decision unconstrained by the Guidance. Moreover, it seems to us that, in fixing a penalty, this Tribunal is bound to base itself on its own assessment of the infringement in the light of the facts and matters before the Tribunal at the stage of its judgment. 500. That said, it does not seem to us appropriate to disregard the Director’s Guidance, or the Director’s own approach in the Decision under challenge, when reaching our own conclusion as to what the penalty should be. The Director’s Guidance will no doubt over time take account of the various indications given by this Tribunal in appeals against penalties.”
“In the case of Coverite Limited the penalty was based on figures supplied by Coverite Limited’s solicitors (Denton Wilde Sapte) on23 May 2005 which showed a turnover of£18.3 million . Para 18 of the Decision refers to a figure of£33.1 million derived from the Financial Analysis Made Easy Report. Coverite Limited’s Annual Report for the Year ended30 June 2004 indicate that the£33.1 million figure derives from the consolidated financial statement for Coverite Limited.”
“Coverite’s accounting procedures before October 2003 were very unsophisticated. Steve Adkins, Coverite’s Finance Manager and Company Secretary only joined the company in October 2003. Since he is the first qualified 6 We should make clear that there has been no suggestion that either Coverite or Denton Wilde Sapte was in any way at fault in providing these figures to the OFT. 54 chartered management accountant to join the company, no detailed accounting information was kept regarding product lines before this time.”
“… In that case, the other parties could rely on unequal treatment, as the Japanese parties did in JFE Engineering . The favoured undertaking would, on the other hand, have to weigh up (as well as all other relevant factors) the risk that, by bringing such an appeal, it would expose itself to the jurisdiction of the Tribunal to increase the penalty imposed on it. It might therefore decide that, discretion being the better part of valour, it would not challenge the finding of breach of the penalty for fear of ending up with the same finding of breach and a heavier penalty. We do not see why the ability of the other parties to rely on unequal treatment as a ground of appeal at all should depend on the decision of the favoured undertaking whether or not to appeal. If there has been unequal treatment in the imposition of penalty, the OFT has acted in breach of relevant principles of Community law, and therefore of the Act. That breach ought in principle to be available to the other undertakings as a ground of appeal.”