Recently a lot of UK's building companies have been handed big fines by the Office of Fair Trading (OFT) for rigging bids for contracts. Companies-competitors colluded, so prices for buildings, that were offered to customers, were very high. But this growing in price didn't affect on demand because customers didn't have a choice (substitutes).For some reason we can think that demand on building is inelastic (doesn't response too much to changing in prices), but this actions were illegal. Economists call this machinations "cover pricing".
Anyway, Kier Group was fined £17.9m, more than any other building firm. Interserve was fined £11.6m, while other companies fined more than £5m were Galliford Try, Ballast Nedam, Bowmer & Kirkland, ISG Pierce and Crest Nicholson, John Sisk & Son, Connaught, Carillion JM, Concentra and Durkan Holdings, and Balfour Beatty. Balfour was fined £5.2m for practices that took place at subsidiary Mansell before its acquisition, the company said.
The UK Construction Group called the decision to penalise the firms "unfair". They think that it is against the law of competition. The body's director Stephen Ratcliffe sad: "Everybody knows - including the OFT - that cover pricing was widespread in the industry in the past."
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