CMA fines water tank firms over £2.7 million
The CMA has today issued 2 decisions imposing fines on suppliers of galvanised steel tanks for breaching competition law.
Galvanised steel tanks are used for water storage in larger buildings, such as schools, hospitals and other commercial and public buildings, and supply the water used in fire sprinkler systems.
Cartel decision
Following a settlement announced in March 2016 and a formal statement of objections in May 2016, the Competition and Markets Authority (CMA) has today issued a final decision imposing fines totalling more than £2.6 million as follows:
- £2,015,135 on Franklin Hodge Industries Ltd and its parent company Carter Thermal Industries Ltd
- £587,926 on Galglass Ltd, and its parent companies Irish Industrial Tanks Ltd and Kernoff Ltd
- £22,248 on KW Supplies Ltd (as economic successor to Kondea Water Supplies Ltd)
Franklin Hodge, Galglass Ltd and KW Supplies Ltd admitted to having colluded with each other, as well as a fourth supplier CST Industries (UK) Ltd, to share the market by dividing customers among themselves, to fix prices of tanks and to rig bids for contracts between 2005 and 2012.
Their aim was to improve profit margins on the tanks by avoiding customers being able to negotiate the best deal through ‘playing’ the competitors off against each other. CST Industries (UK) Ltd and its parent company CST Industries Inc. have been granted immunity from fines under the CMA’s leniency policy, having brought the arrangements to the authorities’ attention and co-operated with the investigation.
Information exchange decision
In a separate decision, the CMA has also found that Franklin Hodge Industries Ltd, Galglass Ltd, KW Supplies Ltd and Balmoral Tanks Ltd breached competition law by exchanging information regarding their current pricing and future pricing intentions, thereby reducing uncertainty among the suppliers about their likely pricing intentions. This included a discussion of target price ranges for 2 sizes of tank.
Balmoral Tanks Ltd (and its parent company Balmoral Group Holdings Ltd) has been fined £130,000 for taking part in this unlawful information exchange. The information exchange took place at a single meeting in July 2012 at which Balmoral was invited to join the cartel arrangement. Balmoral refused, but exchanged commercially sensitive information with its competitors. The meeting was secretly recorded by the CMA.
Balmoral Tanks was not a party to the cartel arrangements.
Stephen Blake, Senior Director of the CMA’s Cartels and Criminal Group, said about the decisions:
Strong competition between businesses has clear benefits for customers, such as lower prices, better quality and more choice. Any weakening of competition that maintains or increases prices will ultimately be at the expense of consumers or tax payers.
Today’s announcement shows the CMA’s commitment to using its enforcement powers to tackle illegal anti-competitive behaviour. The information exchange decision also underlines the fact that exchanging information with competitors, even at a single meeting, can infringe competition law with serious consequences for the businesses involved.
Any company that is approached to join a cartel, or become involved in anti-competitive arrangements, should immediately reject the approach clearly and unequivocally. It should also decline to participate in any discussions that involve the sharing of confidential and competitively sensitive pricing information.
The CMA has produced a range of guidance to help businesses understand more about competition law, including an at-a-glance guide and a series of animated videos that explain what anti-competitive behaviour looks like.
For more information on the investigation see the case page.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and certain consumer law.
- The Competition Act 1998 prohibits agreements, practices and conduct that may have a damaging effect on competition in the UK. The Chapter I prohibition covers anti-competitive agreements and concerted practices between businesses which have as their object or effect the prevention, restriction or distortion of competition within the UK. Article 101 of the Treaty on the Functioning of the European Union (TFEU) covers equivalent agreements or practices which may affect trade between EU member states.
- Any business found to have infringed the prohibitions in the Competition Act 1998 or the TFEU can be fined up to 10% of its annual worldwide group turnover. In calculating financial penalties, the CMA takes into account a number of factors including seriousness and duration of the infringement(s), turnover in the relevant market and any mitigating and/or aggravating factors.
- The fines in the cartel decision (for market sharing, price-fixing and bid-rigging) include a discount to reflect savings to the CMA resulting from the companies’ admissions and co-operation with the investigation. Franklin Hodge Industries Ltd also received a 30% discount after applying for leniency and co-operating with the CMA, including in a related criminal investigation into whether individuals had committed a criminal cartel offence under section 188 of the Enterprise Act 2002. These proceedings concluded with one conviction following a guilty plea and 2 acquittals following a trial by jury.
- The exchange of information which is the subject of the second decision took place at a single meeting in July 2012 (and was shared with Galglass after the meeting). The information included both generic and contract-specific information, in the form of price bands and prices quoted for specific contracts relating to 2 types of cylindrical galvanised steel tanks.
- The level of Balmoral’s fine reflects a number of factors, including Balmoral’s refusal to join the cartel arrangement and the overall pro-competitive effect of its entry on the market in late 2011, as well as Balmoral’s significant co-operation in the CMA’s civil and related criminal investigation. Before Balmoral Tanks’ entry, the market for cylindrical galvanised steel tanks had been subject to the long-running cartel arrangement between all the UK suppliers described above; involving price-fixing, bid-rigging and market sharing by way of customer allocation. Balmoral Tanks Ltd was not a party to these long-running cartel arrangements.
- No additional penalty has been imposed on the other 3 companies involved in the separate information exchange infringement, who have been fined for their involvement in the cartel during the same period. This reflects the close link between their involvement in the 2 infringements, the fact that the penalties for the main cartel arrangement covered the period of the information exchange infringement and the level of penalties already imposed for the more serious cartel activity.
- Anyone who has information about a cartel is encouraged to call the CMA cartels hotline on 020 3738 6888 or email cartelshotline@cma.gsi.gov.uk.
- Any individual or business affected by the anti-competitive behaviour in this case can rely on the CMA’s infringement decision if making a claim in the courts for damages against the companies concerned. It will be for the court to determine the level of any damages.
- Under the CMA’s leniency policy a business that has been involved in a cartel may be granted immunity from penalties or a significant reduction in penalty in return for reporting cartel activity and assisting the CMA with its investigation. Individuals involved in cartel activity may also be granted immunity from criminal prosecution for the cartel offence under the Enterprise Act 2002. The CMA also operates a rewards policy under which it may pay a financial reward of up to £100,000 in return for information which helps it to identify and take action against illegal cartels. More information on the CMA’s leniency and informant reward policies is available on the cartels guidance page.
- More information on how to achieve compliance with competition law is available on the CMA guidance page.
- The CMA has also created a form for reporting a competition or market problem so anyone concerned about potential anti-competitive or market issues can raise an alert.
- A list of current Competition Act investigations is available on the CMA website.
- For more information on the CMA see our homepage and follow us on Twitter @CMAgovuk, Flickr and LinkedIn and like our Facebook page. Sign up to our email alerts to receive updates on Competition Act 1998 and cartels cases.
- Media enquiries should be directed to Neil Kernohan (neil.kernohan@cma.gsi.gov.uk, 020 3738 6170).