Water tank cartel shared out customers

Will Green is news editor of Supply Management
15 February 2018

Details of the methods used by a cartel to fix the price of water tanks in the UK have been released by the Competition and Markets Authority (CMA).

The CMA said the four main suppliers of galvanised steel tanks, used for water storage in large buildings such as schools and supermarkets or for fire sprinkler systems, met in secret to divide up customers, set prices and rig bids for contracts.

In 2016 three firms – Franklin Hodge Industries and its parent company Carter Thermal Industries, Galglass and parent companies Irish Industrial Tanks and Kernoff, and KW Supplies – were fined more than £2.6m. A fourth firm, CST Industries (UK), was granted immunity because it raised the alarm and cooperated with the investigation.

Initially the businesses met as part of a legitimate working group to discuss European sprinkling system standards, but between 2005-12 they held meetings with the intention of “avoiding having customers try to negotiate cheaper prices through playing the suppliers off against each other”, said the CMA.

In a witness statement that formed part of the case one firm said: “We agreed that we all supplied fairly identical products and therefore should be able to charge a respectable price without the necessity to fight each other for each and every contract.”

The firms drew up a list of customers and marked them A, B or C, to divide them up, and agreed fixed price lists.

“We all agreed that, whatever the pressure from the various contractors, we would only discount our prices to a maximum predetermined level. However … we concluded that we had to come up with a specific price agreement. Something that harmonised prices between us all,” said one of the firms in a witness statement.

The cartel used the rising price of steel to mask their activities, the CMA said.

Concerning bidding for contracts, one firm said in a witness statement: “[Company A] was allowed to discount the price of a tank to an ‘A’ allocated contractor by an agreed percentage off the guide price in order to win the bid.

“However, any of the others who were asked to submit a bid for the same job would only provide the price as dictated by the guide, less a smaller percentage, giving the impression of competition. The smaller percentage was never enough to win the work.”

A fifth supplier, Balmoral, which had recently entered the market, was fined £130,000 after attending a meeting with the cartel where it refused to join but did discuss its pricing policy.

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