Office of Fair Trading acts in support of retention money clauses

The Office of Fair Trading has recently listened to and acted upon concerns raised by the Construction Confederation. The concern was in relation to the practices of British Construction Steelwork Association Limited (BCSA), the Pre-cast Flooring Federation (PFF) and the Federation of Piling Specialists (FPS). Until recently these trade associations had prohibited their members from entering into contracts that provide for retention money being held for a period after completion of the works.

The Competition Act 1998 gives the Office of Fair Trading the power to investigate and intervene in circumstances where an organisation has practices which have the object or effect of preventing, restricting or distorting competition in the UK. The Director General of Fair Trading, Mr John Vickers, said:

"Contract terms between suppliers and customers should generally be freely negotiated. Trade association rules that unduly restrict commercial freedom reduce customer choice."

As a result of this intervention the BCSA and the PFF have revoked the rule that prohibited members from entering into contracts that required retention money to be held. At its next meeting in February the FPS will recommend to its members that they take the same step.

The overall effect of this action is that the individual members of these three trade associations will be free to decide what terms of contract they are prepared to offer and enter into. It is also a reminder to other trade associations and collective industry organisations that anti competitive measures will not be tolerated by the Office of Fair Trading.

For further information please contact Tania Maycock (Construction) at [email protected] or on +44 (0)20 7367 2299 or Sue Hankey (Competition) at [email protected] or on +44 (0)20 7367 2960.