Water tank firms admit cartel and agree to pay £2.6 million fines
Three businesses have admitted participating in an illegal cartel in relation to the supply of cylindrical galvanised steel tanks in the UK.
In a settlement with the Competition and Markets Authority (CMA), the companies have agreed to pay fines totalling more than £2.6 million for taking part in the cartel. This includes a discount to reflect the resource savings to the CMA generated by the companies’ admissions and their co-operation with the CMA’s investigation.
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.
Under the cartel arrangements, Franklin Hodge Industries Ltd, Galglass Ltd and Kondea Water Supplies Ltd agreed with each other, and with CST Industries (UK) Ltd, to share the market between them, fix prices and rig bids between 2005 and 2012.
As part of the cartel, the companies divided up customers among themselves and agreed prices for a range of galvanised steel tanks. Under the arrangement, if a customer had been allocated to a particular company, that company would quote a lower price for the job with the other cartel members quoting a higher price, so as to give the appearance of competition where in fact there was none. These arrangements were agreed and reinforced at regular meetings between the participating companies over a 7-year period, as well as through contacts concerning particular bids.
Provided it continues to co-operate and complies with the other conditions of the CMA’s leniency policy, CST Industries (UK) Ltd, together with its parent company, CST Industries Inc, will not receive a fine, having reported the cartel to the CMA’s predecessor and co-operated with the investigation, in accordance with the CMA’s leniency policy. Franklin Hodge Industries Ltd also received a discount under the leniency policy for co-operating with the investigation.
The CMA also conducted a related criminal investigation into whether individuals had committed an offence under section 188 of the Enterprise Act 2002, the criminal cartel offence. These proceedings have now concluded, with one conviction following a guilty plea and two acquittals following a trial by jury.
Michael Grenfell, CMA Executive Director with responsibility for enforcement, said:
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 companies in this case agreed to restrict competition, with the aim of maintaining or increasing prices for galvanised steel tanks – an important product which forms part of the water sprinkler systems used in buildings to protect the public against fires. As these fines demonstrate, the CMA will not tolerate such practices.
Notes for editors
- 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 (‘undertakings’) 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.
- Franklin Hodge Industries Ltd and its parent company, Carter Thermal Industries Ltd have agreed to pay a maximum penalty of £2,015,135. This includes a 30% reduction for leniency and a further 20% reduction for settlement. The liability of Carter Thermal Industries Ltd arises from the fact that it held 100% of the shares in Franklin Hodge Industries Ltd during the relevant period, and is therefore presumed to have exercised decisive influence over Franklin Hodge Industries Ltd and to form part of the same ‘undertaking’.
- Galglass Ltd (in liquidation), Kernoff Ltd and Irish Industrial Tanks Ltd have agreed to pay a maximum penalty of £653,251, which includes a 20% reduction for settlement. The liability of Kernoff Ltd and Irish Industrial Tanks Ltd arises from the fact that they held (directly or indirectly) 100% of the shares in Galglass Ltd during the relevant period, and are therefore presumed to have exercised decisive influence over Galglass Ltd and to form part of the same ‘undertaking’.
- KW Supplies Ltd is the successor ‘undertaking’ to Kondea Water Supplies Ltd (in liquidation) and has agreed to pay a maximum penalty of £24,720, which includes a 20% reduction for settlement.
- The fines will not become payable until after the CMA has issued a formal infringement decision imposing the fines and setting out the CMA’s findings in full, together with the basis for the calculation of the fines. The next procedural step is the issue of a formal statement of objections, which is expected in May 2016.
- A party under investigation may ask to enter into settlement if it is prepared to admit that it has breached competition law and is willing to agree to a streamlined administrative procedure for the remainder of the investigation. In return, the CMA may agree to impose a reduced penalty on the business where settlement would achieve clear efficiencies, resulting in earlier adoption of any infringement decision and other resource savings.
- Anyone who has information about a cartel is encouraged to call the CMA cartels hotline on 020 3738 6888 or email firstname.lastname@example.org.
- 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 in certain defined circumstances 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. For more information on the CMA’s leniency and informant reward policies, go to leniency and rewards.
- For more information on how to achieve compliance with competition law, see our competition law compliance guidance collection.
- 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 consumer law. For more information see the CMA’s homepage.
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- Enquiries should be directed to Kasia Reardon (email@example.com, 020 3738 6901).