Steel water tank suppliers fined a total of £2.6 million for anti-competitive practices

First published by Admin on December 31, 2016 in the following categories: Latest and tagged with cartels

The U.K. competition watchdog, the Competition and Markets Authority (CMA), has issued two decisions imposing fines on three suppliers in the steel tank industry for anti-competitive practices. The companies involved are: Franklin Hodge Industries Ltd; Galglass Ltd; Kondea Water Supplies Ltd; and CST Industries (U.K.) Ltd.

The civil investigation, which has been ongoing since 2012, has finally come to a head with The CMA satisfied that suppliers of galvanised steel tanks have infringed U.K. and EU competitions laws.

Use of steel tanks

Galvanised steel tanks are often used for water storage in larger buildings, such as schools, hospitals, and other commercial and public buildings. They can also supply the water in the event that the fire sprinkler system is used.

The water tank companies admitted to partaking in a cartel with the primary aim of sharing the market, maintaining high prices, and restricting competition between 2005 and 2012.

Cartel agreement

As part of the agreement, the companies divided up customers among themselves and rigged prices for the supply of the galvanised tanks. By way of an example, if a customer had been allocated a company for the supply of the tanks, that particular company would quote the customers a much lower price than the other two companies under the cartel agreement; giving a false appearance that they were the cheapest suppliers, when in actual fact, this was far from the truth. The companies met with one another regularly to review the agreement over a seven year-long period.

In March, four companies admitted participating in an illegal agreement in relation to their supply of galvanised steel tanks in the U.K. In a settlement with the CMA, the companies have agreed to pay £2.6 million for undertaking the anti-competitive agreement. The total fine includes a discount that was given to the companies for cooperating with the CMA, and the penalty is broken down as follows:

All water tank suppliers admitted to having conspired together to improve profit margins which was achieved by prohibiting customers from fairly ‘shopping around’ for a better deal.

Leniency policy

What has possibly come as a surprise is the fact that CST Industries (U.K.) Ltd and its parent company have been excused from a fine under the CMA’s leniency policy. The policy gives total or partial immunity from fines if it provides the competition watchdog with information on a cartel; even if the company participated in the anti-competitive agreement as well.

The cartel agreement has likely had a huge effect on the market as the necessity of these water tanks is crucial. It’s an important product that’s used in buildings to protect the general public against fires.

Information exchange agreement

In a separate decision, the CMA also found Franklin Hodge Industries Ltd, Galglass Ltd, KW Supplies Ltd, and Balmoral Tanks Ltd guilty of competition law infringements by discussing prices and their future pricing intentions, which is explicitly prohibited by the Competition Act. Balmoral Tanks and its parent company have been fined £130,000 for its anti-competitive information exchange.

Importance of competition

The CMA Executive Director, Michael Grenfell, reiterated the importance of competition:

“…vigorous competition between businesses has benefits for customers and for the economy, keeping prices down and encouraging businesses to be more efficient and to improve quality.”

The water tank suppliers acted against this in a bid to restrict competition and consequently reduced free choice for customers.