NMa Presents Analysis of the Construction Industry

The Dutch construction industry has characteristics which increase the risk of cartel formation. One of the factors which appears to increase the likelihood of cartels forming is the fact that construction companies frequently work together in combinations. This appears from the report on the market analysis commissioned by the Netherlands Competition Authority (NMa) in support of research carried out by NMa into the construction sector. NMa is currently investigating whether prohibited practices that restrain competition have, in fact, occurred in the construction industry.

The report gives special attention to the 100 largest public sector construction projects carried out in the period 1998-2001. One of the report’s conclusions is that the formation of combinations may, for instance, have operated as a channel for exchanging information and as a sanctioning mechanism that ensures the continued existence of cartels. NMa will include the areas of attention arising from the analysis in its investigation and will pay attention, for instance, to the formation of combinations.

The report mentions that cross-border participation in construction projects (still) appears to be insufficient to ensure effective international competitive pressure. The report also concludes that it is improbable on the basis of the data analysed that a single company has a dominant position. Despite this, in assessing mergers and acquisitions in the construction industry, NMa will continue to investigate whether an undertaking, either on its own or in combination with others, has a dominant position on a specific market for, for instance, large infrastructural projects.

From the analysis it appears that the ten largest construction companies in the Netherlands were involved in 71 of the 100 largest public sector construction projects in the period 1998-2001. These companies frequently worked in combination with each other on these projects. The 100 largest projects represent a value of EUR 5.7 billion. The largest projects are infrastructural projects, including the construction of the high-speed rail link.

The report will be published on NMa’s website (www.nma-org.nl).