Be a hunter, not the hunted

7 May 2008
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08 May 2008

The OFT has been busy lately, highlighting potential cases of price fixing and other cartel activity in the construction and retail sectors. But will this surge last and what can buyers do to help stamp out illegal activity? Jake Kanter finds out.

It has been difficult for buyers to ignore the Office of Fair Trading (OFT) over the past two months.

The familiar acronym has become synonymous with bold accusations of "price fixing", "cover pricing" and "collusion" against suppliers, and in one case against buyers, too. Last year John Fingleton, the chief executive of the competition authority, said the group was "hunting" for new cases, recognising investigations were a "gap" in the group's work (News, 15 November).

Recent activity has centred around the construction and retail sectors. Last month, 112 construction firms were accused of cover pricing in tenders for public sector projects (News, 24 April). Retailers and cigarette makers are also being investigated after allegations of price-fixing.

These cases demonstrate the OFT is taking a stand against potential rule breakers. But is it simply baring its teeth? Or will this be a longer trend for which buyers and suppliers will have to prepare themselves for consistent scrutiny?

"The OFT is trying to get the message across that it is serious about stopping anything that infringes competition law," says Andrew Chandler, competition partner at law firm Eversheds. "Until that happens, it will continue to get more dramatic."

Martin Rees, partner at lawyers DLA Piper, says the Treasury has given a clear message to the OFT that it needs to make more impact as a gesture to consumers.

And both agree purchasers will have to take extra care to protect themselves from any liability. "Buyers will have to structure their relationships with suppliers properly and put in place clear guidelines on discussions. Organisations have to make sure buyers know where the risks lie and what they can and can't do," explains Chandler.

Rees says buyers urgently need clear instructions for their day-to-day activity, to avoid raising suspicion. "They must negotiate costs in a very narrow manner on price alone. It's important not to refer to market conditions or retail margins."

Jeremy Swain, senior associate at law firm Denton Wilde Sapte, says the OFT offers some guidance on spotting anti-competitive behaviour (News, page 7). The report, Making competition work for you, is compiled by the OGC and the OFT and lists 10 suspicious bidding patterns to watch for. These include suppliers submitting tenders identical in price, or bids with little detail. It also urged buyers to note vendors making last minute changes to contracts.

But Guy Lougher, national head of competition at legal firm Pinsent Masons, says: "Buyers are likely to be most at risk of breaching competition rules and should be looking at their activity with regard to the OFT's standards."

Chandler agrees, suggesting the thrust of the OFT's recent allegations has greater meaning: "They are a message to everyone and they should be taken very seriously."

SMmay2008

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