The OFT has stated that it will be concentrating on three themes within the sector:

• inputs into construction and that the major focus of its efforts here will be the operation of cartels

• the supply of new buildings

• services relating to housing, for instance estate agents and repairs.

The main reasons why the sector has been singled out is firstly because of its size and importance but more significantly because of the large number of complaints that it generates. Many commentators have suggested that further attention has been drawn to the construction industry and its practices because of the successful bid for the 2012 Olympics and the huge amount of construction work that will have to be carried out given the need for an upgraded infrastructure.

In recent years the legislation regarding anti-competitive practices has been tightened up in an effort to make the construction industry more competitive and stamp out cartels. Cartels are a widespread problem within the industry and can lead to companies agreeing not to compete against one another. These can be in respect to various matters and for instance might be an agreement that companies will only operate in one area and not “tread on another person’s patch”, carve up suppliers, agree on pricing or arrange as to who will be successful in obtaining a contract.

The 1998 Competition Act brought in laws to legislate against anti-competitive agreements and to prevent the abuse of a dominant position in the market place. Further legislation was brought in via the Enterprise Act 2002 and under that Act perpetrators can be sentenced to five years in prison, face unlimited fines or be disqualified from acting as a director for up to 15 years.

The OFT has widespread powers to investigate and fine offending companies that fall foul of the legislation. The OFT may carry out dawn raids on a company and may even look at an individual's home. There has also been a policy brought in to encourage whistle blowing within the industry to expose guilty parties. In addition to the penalties noted above, the OFT may fine the companies involved. The OFT has the power to fine a company up to ten per cent of group worldwide turnover.

Do not be fooled into thinking that these are empty threats from the OFT. A simple look at their website and also various press reports shows that the OFT has been using its powers to great effect. Two recent examples:

• in February 2006, 13 roofing contractors were fined £2.3M. It was found that they had fixed prices for flat roofing and surfacing work in England and Scotland

• in July 2006, fines were imposed on four firms who had been accused of partaking in a double glazing cartel. In that instance fines were imposed totalling £1.38M

The OFT has also made it clear that there are many more actions in the pipeline. It has stressed that it is of no consequence what size the organisation is - the legislation still applies so don't think you are exempt or will dip beneath the radar just because you are a small organisation. The reported cases make it clear that rogue bodies will be tracked down.

So how do you prevent it happening to you? As always, prevention is better than cure so start with the basics and make sure that you carry out a risk management exercise on your business and employee training methods. Ensure that all employees fully understand the laws in relation to competition law. It may be advantageous to implement employee training programmes that cover the legislation involved, which may sound expensive in the short term but you should reap the benefits in the long term.

You should also check your company handbook together with contracts of employment to see if changes are needed from a human resources perspective. Do you want to think about disciplinary procedures if there is a breach of the legislation? Look at your contract documentation in relation to your various jobs. It may be worth considering having a Competitive Compliance Policy in place which will not only assist your staff but is also considered good practice.

Now let’s look at the worst case scenario. If for instance the OFT has indicated that it intends to investigate you and you find that there are deficiencies with your arrangements, what do you do now?

Firstly, you must co-operate fully and provide all necessary information and documentation. If you believe that you will be found guilty for your arrangements you can also apply for leniency and the OFT may reduce the level of the fine to be imposed. This is well worth considering as the fine may be reduced by 100%. Indeed there is policy guidance from the OFT that it wishes to encourage companies who know of cartel arrangements to come forward and tell the OFT about it. Again, let’s look at two examples both arising from the same investigation:

• company A became aware as to the existence of a cartel before the OFT decided to investigate and liaised with them. Their fine was reduced from £1.88M to zero

• company B who became involved at a later stage, cooperated with the OFT and their fine was reduced from £256,000 to £128,000. Therefore between the two companies the total amount of the fines was reduced by over £2M!

To summarise:

• have your procedures in place including a HR policy and a Competitive Compliance Policy

• if you become aware as to the existence of a cartel, consider informing the OFT and take professional advice immediately

• if the OFT do become involved, consider how best to co-operate and making a plea for leniency.