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Kier Challenges Fine in U.K.’s Biggest Cartel Probe

June 28 (Bloomberg) -- Kier Group Plc, the builder fined 17.9 million pounds ($27 million) last year following the biggest cartel investigation by a U.K. antitrust regulator, told an appeals court that the penalty was “discriminatory.”

Britain’s Office of Fair Trading should be made to reduce the fine because it didn’t account for Kier’s low profit margin or the builder’s early admission that it rigged bids, lawyers for the company said today at a hearing at the Competition Appeal Tribunal in London.

“The fine was inflicted above levels necessary for deterrence,” Mark Brealey, Kier’s lawyer with the firm Brick Court Chambers in London, said at the hearing. He compared the penalty with a motorist getting their hand chopped off as a punishment for breaking the speed limit.

The fines, the most levied by the watchdog in an antitrust probe, capped a five-year inquiry into efforts to stamp out low bids and inflate costs. Many of the appeals claim the OFT’s process of raising fines to deter would-be infringers is calculated wrongfully using a percentage of a company’s global revenue instead of U.K. sales alone.

“This appeal, if successful, could have a major impact on the OFT’s fining policy and, in particular, on the application of the minimum deterrence threshold,” said Ros Kellaway, who leads the competition group at the law firm Eversheds LLP in London. The challenge “could impact on other cases currently under appeal as well as future infringement decisions.”

Challenging Liability

The regulator in September 2009 levied fines totaling 129.5 million pounds against 103 companies, including Balfour Beatty Plc and Carillion Plc, the U.K.’s two biggest builders. Twenty-five of the firms appealed the size of the fines, including six that are also challenging liability in the case.

Interserve Plc received the second-biggest fine of 11.6 million pounds, while Galliford Try Plc received a penalty of 8.3 million pounds. Balfour and Carillion were fined 5.2 million pounds and 5.4 million pounds, respectively.

Last month, the OFT’s first criminal antitrust trial against four current and former British Airways Plc executives collapsed, and in April a lack of evidence forced the OFT to reduce fines against supermarkets and food companies who admitted colluding on dairy prices.

Recent problems for the OFT highlight “conflicting roles” it holds in the investigatory process, said Frances Murphy, the head of Jones Day LLP’s London antitrust practice, who is representing two other builders challenging liability and penalties in the case.

‘Considerable Strain’

“The appeals will put considerable strain on the OFT because they will once again bring under the spotlight the way in which the OFT manages investigations, deals with whistleblower evidence and levies its fines,” Murphy said today in an interview.

Jonathan Marciano, a spokesman for the OFT, said today that the agency would “vigorously” defend the fines.

Kier, based in Bedfordshire, England, already had its fine reduced by 5 percent because the company started a compliance program, court records show.

To contact the reporter on this story: Erik Larson in London at elarson4@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

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