CMA hand out multi-million-pound fines to construction firms
On 1 December 2020, the CMA announced that it had decided to accept these undertakings in lieu of reference. This was on the basis that Breedon’s divestment to Tillicoultry Quarries Limited of certain assets (which were either already owned by Breedon or acquired from Cemex) would constitute divestment of the full market share increment in each market and so should replace the competitive constraint that would otherwise be lost due to the merger. In the CMA’s view, the combination of the proposed undertakings and the purchase of the divestment business by Tillicoultry would therefore be appropriate to remedy, mitigate or prevent the identified competition concerns and would form as comprehensive a solution as was reasonable and practicable in the circumstances. The CMA will therefore not refer the merger to a Phase 2 investigation.”
Regulating competition in the construction industry appears to be a particularly hot topic at the moment, with the Competition and Markets Authority (CMA) taking a particular interest in ensuring the big players are not colluding to exclude smaller companies by entering into anti-competitive arrangements.
One recent example is the hefty £9m fine given to two of the UK’s largest suppliers of rolled lead (Associated Lead Mills Ltd and H.J Enthoven Ltd trading as BLM British Lead) last week. The CMA found there were four anticompetitive arrangements which took place between October 2015 and April 2017, including collusion on prices, agreeing not to target certain of each other’s customers, and arranging not to supply a new business because it risked disrupting existing customer relationships. They were also involved in exchanging commercially sensitive information. Both companies admitted their roles in the illegal cartel earlier this year and now face fines of £1.5m and £8m respectively.
At the same time, the CMA has extended its time period for considering the undertakings offered by Breedon Group plc in lieu of reference of its acquisition of assets of Cemex Investments Limited. The CMA is concerned that the merger between Breedon (a construction materials group) and Cemex (a building products company) will result in a substantial lessening of competition in a number of local markets where the parties have a large presence and compete closely with limited competition from other suppliers. Under section 73A(3) of the Enterprise Act 2002, the CMA has 50 working days to decide to accept the undertakings, although this period can be extended under section 73A(4) by no more than 40 working days, if the CMA considers that there are special reasons for doing so. In the circumstances, the CMA considered that the fact the undertaking involves an upfront buyer and that the extension wouldn’t materially increase the risk of an anti-competitive outcome was sufficient to justify the extension. The new deadline will therefore be 5 January 2021.
These are the latest in a long line of CMA investigations into the construction industry, which has perhaps flown slightly under the radar in the past. Companies are therefore warned that they may face large fines if they are party to such agreements.
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