Retirement homes and care homes have been at the centre of competition breaches several times. The 2013 access and alarm systems case was a notable one…
In 2013, the Office of Fair Trading (OFT) fined four U.K. suppliers of access and alarms systems who had taken part in anti-competitive behaviour when supplying services to retirement homes.
The four companies were fined over £50,000.00 after an investigation that started in 2011.
The Office of Fair Trading investigated the behaviour of the four companies during a four-year period between 2005 and 2009. They found that all four companies had engaged in anti-competitive behaviour across this period.
The four companies involved were: Cirrus Communication Systems Limited; Owens Installations Limited; Peter O’Rourke Electrical Limited; and Glyn Jackson Communications Limited.
When bidding for contracts, Cirrus Communication Systems Limited reportedly contacted the other companies and shared information about what they would be offering to the potential client. Cirrus Communication shared this information with the three other companies so the others would put in a higher bid to the same potential client in order to ensure that Cirrus Communication would win the contract.
Although Cirrus did not always win the contracts, the Office of Fair Trading’s investigation found that at least 65 tenders were affected. The combined value of the tenders affected was reportedly £1.4 million.
It was Peverel Group Limited, the parent company of Cirrus Communications at the time, who brought the anti-competitive behaviour to the attention of the Office of Fair Trade. In doing so, the four companies were eventually fined over £50,000.00.
With the four companies engaging in the anti-competitive behaviour, clients may have been ripped-off and had to pay higher prices for products and services.
What was the outcome?
The outcome of the investigation was that the companies involved were issued a fine of £50,000.00. Due to the Office of Fair Trades leniency policy, because Cirrus Communications and parent company Peverel Group Limited were the company to inform the Office of Fair Trade about the anti-competitive behaviour and further cooperate with them, they were not fined.
This fact has been hotly debated, with the media slamming Cirrus Communications as having gotten away with ripping people off without paying a penny for the scandal.
Owens Installations Limited also cooperated with the OFT and received a discount on the fine they were issued, in-keeping with the leniency policy of the Office of Fair Trade at the time. The leniency policy can give companies that come forward and admit to taking part in anti-competition a discount on their fine
It’s believed that the other two companies involved went into liquidation.
How did they breach competition law?
The companies breached the law by engaging in an agreement of cover-pricing. Cover pricing is where companies involved in a tender, bid a high price so a company may submit a lower bid that is seen as more competitive. In doing so, the company who submits the lower bid wins the contract, but its all set-up. The intention is for the “lowest bidder” to win the contract, and you can effectively charge higher prices if the competitors set even higher ones.
On top of that, although the companies that are bidding the higher prices know they’re not going to win, they can still remain on a client’s list to be considered to bid for a tender in the future. Ultimately though, clients may not enjoy fair competition due to the distortion created by the cover-pricing raising the costs of the tender. This can lead to them unknowingly paying more.