The competition regulator “plucked a figure almost from thin air” when fining demolition firm Keltbray £20m over cover bidding, the firm’s legal representative claimed yesterday in an appeal hearing.
Keltbray’s fine, initially reduced to £16m after agreeing a settlement, was the biggest among the 10 demolition firms that were fined last year by the Competitions and Markets Authority (CMA) for colluding over tender prices between 2013 and 2018.
However, Keltbray, which admitted its part in the scandal, has launched an appeal in the Competition Appeal Tribunal against the level of the financial punishment, which it says is disproportionate and was calculated wrongly.
In their opening statement yesterday (29 April), Keltbray’s legal representative said: “Keltbray submits the penalty of £20m is disproportionate.
“[The CMA] plucked a number almost from thin air which cannot be justified in light of the lower margin nature of the industry, in light of Keltbray’s financial position or considering case law.”
The representative argued that the CMA should only have taken into consideration turnover from Keltbray’s biggest jobs when it calculated the fine.
The CMA had “failed to identify that highly specialised demolition services fall into a different product market to general demolition services. This has a significant impact on affected turnover,” they said.
The representative told the tribunal that the £20m amount was equivalent to nine times the firm’s losses between 2019 and 2022, and 5.8 years’ worth of profits if Keltbray achieved the industry average margin on its turnover.
“The CMA submits that the penalty is somewhat less burdensome to Keltbray when looked at as a percentage of turnover,” they said.
“That may be true but in the context of low margin business, turnover is not a measure of an undertaking’s ability to pay penalties.”
Keltbray also complained about the CMA’s decision to restore the £20m level of the fine following the firm’s decision to launch the appeal.
In their opening statement, the CMA’s legal representative told the tribunal that not one of the firms involved in the case had claimed there are separate markets for general and complex demolition projects until Keltbray launched its appeal.
It denied calculating the fines wrongly, adding: “Keltbray hasn’t heeded the lessons from [previous] cover-bidding in the industry so deterrence is needed.”
On the restoration of the £20m fine amount, they said: “After settling the case, Keltbray had second thoughts and pulled out.
“It it is of course entitled to do that but having done so we say it can’t sensibly claim to be a settled party that is entitled to a settlement discount.”
The hearing is expected to last five days.
