UPDATE 2-UK suspects millions lost to building cartels

(Adds more detail, comment, background)

By Dan Lalor

LONDON, April 17 (Reuters) - More than 100 companies building British schools and hospitals are suspected of forming cartels to boost contract prices by millions of pounds, Britain's consumer watchdog said on Thursday.

The Office of Fair Trading named 112 companies, including Balfour Beatty (BALF.L) and Carillion (CLLN.L), and said over two-thirds had admitted involvement in bidding for work at artificially high prices.

"The tendering authority ... is not made aware of the contacts between bidders, leaving it with a false impression of the level of competition and this may result in it paying inflated prices," the OFT said.

The police have not yet been involved in what is, for the time being, a civil investigation, an OFT spokesman said.

The collusion between building companies includes an agreement that the successful tenderer pays an agreed sum to the unsuccessful tenderer. "More serious forms of bid rigging are usually facilitated by false invoices," the OFT said.

A spokesman said the practice was "endemic" and very many more companies were likely to be involved but, at this stage, the OFT was more concerned with stamping out the behaviour than finding every guilty party.

The OFT has looked at over 1,000 contracts varying in size from "several hundred thousand pounds to many millions". It will focus on only some of these contracts to speed its investigation.

Chief Executive John Fingleton said the investigation "together with the OFT's previous decisions in the roofing sector, will hopefully send out a strong message to the construction industry about the seriousness with which we view suspected anti-competitive behaviour".

Any business found to be a member of a cartel could be fined up to 10 percent of its worldwide turnover, but penalties are reduced for those that cooperate with an investigation.

Balfour Beatty said it had "cooperated fully with the OFT in all aspects of its investigation. As a result ... the OFT has granted leniency to Balfour Beatty, thus reducing any fines which might ultimately be levied."

Another builder, Connaught CNT.L, said it had been "contacted by the OFT in 2007 in relation to a small number of tenders in one of its subsidiary companies dating back to 2000. The tenders represent a very small proportion of the bidding activity of the group during that period". (Editing by Paul Bolding)