The Romanian Competition Authority Sanctions Five Companies for Bid Rigging in Road Construction Projects (C.N.A.D.N.R)

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Published in e-Competitions | N° 57306, www.concurrences.com

On 13 December 2012, the Romanian Competition Council (“RCC”) sanctioned five companies a total of more than EUR 660,000 for engaging in bid rigging activities in the public procurement procedures organized by the Romanian National Company of Motorways and National Roads (“C.N.A.D.N.R.”).

In 2006, C.N.A.D.N.R. organized a public tender for the award of public works contracts to install road, longitudinal and cross markings on national roads. According to the decision of the contracting authority, the public procurement contract was divided into 7 lots.

Five years later, bid rigging suspicions determined the RCC to initiate an ex officio investigation, aimed at assessing whether certain participating companies have illegally coordinated their behavior in the public tender, by infringing the competition rules.

The investigation revealed that, in order to participate in the public procurement procedure, the companies organized themselves in two associations: “Plastidrum Association” (consisting of S.C. Plastidrum S.R.L. and S.C. Signature Semnalizare S.R.L.) and „Swarco Association” (consisting of S.C. Swarco România S.R.L., Swarco Heoscont Strassenmarkierung GmbH and Eleftherios Kokkinakis LTD.). According to the award decisions, the Plastidrum consortium was the winner of all the 7 lots of the public procurement contract.

First, the RCC noted that the Swarco consortium submitted tender offers for all the 7 lots, but each time it was disqualified for the failure to meet one of the minimum qualification requirements, related to similar experience.

According to the tender documentation, the bidder was required to prove that it had completed and fulfilled in the past five years a contract, which had as its object the performance of road marking works on national roads, with a value equal to or higher than a minimum threshold, specified for each lot.

In addition, submitting tender offers for several lots depended on the proof of cumulated similar experience, by adding the thresholds for the respective lots. Thus, in order to submit tender offers for all 7 lots, Swarco consortium had to prove a similar experience of approximately EUR 40 million (the cumulative amount of the 7 lots).

Although it was aware of the minimum qualification requirements, and of the inevitable disqualification consequences in case of failure to meet any of them, Swarco consortium submitted tender offers for all 7 lots, without satisfying the similar experience criteria.

In this context, the RCC suspected that Swarco consortium pursued other purposes than winning the public procurement contract. By analyzing the public procurement regulations, according to which the contracting authority was obliged to repeat the procedure in case less than 2 bidders submitted tender offers, the RCC was of the opinion that the tender offers submitted by Swarco consortium were nothing but mere formal tenders, aimed at guaranteeing the minimum number of acceptable bidders. In this way, Swarco consortium ensured that the procurement procedure would not be cancelled for this reason.

The RCC also noted a difference in the prices for the tender offers submitted by the Plastidrum consortium for the 7 lots: while prices for lots 1, 3, 4, 5 and 7 were stable, those for lots 2 and 6 were higher.

The explanation provided by the association (higher personnel and transportation expenses) was dismissed by the RCC. The analysis showed that the higher prices were not economically justified as they were generated, in fact, by the artificial increase in the purchase price of certain materials. Thus, the RCC pointed out that the price increase was only designed to ensure the winning of contracts for lots 2 and 6 at higher values, with the support of Swarco consortium, ensuring the minimum legal number of bidders.

In addition, the investigation uncovered evidence of cooperation between the two associations through anticompetitive meetings and discussions, carried out along with the public procurement procedure.

On 9 June 2006, when the tender offers were opened, the Plastidrum Shareholders General Meeting decided the establishment of 2 new branches, whose shareholders were, on the one hand S.C. Plastidrum S.R.L. and Elefterios Kokkinakis LTD and, on the other hand, S.C. Plastidrum S.R.L and S.C. Swarco Romania S.R.L.

One month later, on 6 July 2006, the public procurement contracts related to lots 2 and 6 were assigned the two newly established companies. On 13.07.2006, S.C. Plastidrum S.R.L transferred the shares held in the two newly established companies to Swarco Heoscont and Kokkinakis LTD.

Kokkinakis LTD claimed that the establishment of the branches was due to the disappointing outcome of the public procurement procedure, whereby Swarco consortium was not awarded any contract. The association invitation from Plastidrum consortium offered the possibility of remaining active on the market for road marking works in Romania. The same explanation was provided by Swarco.

However, according to the RCC Decision, the explanations provided by Kokkinakis LTD and Swarco were contradicted by the time frame of their own actions.

Although the General Meeting of Shareholders of Plastidrum was held on 9 June 2006, the call for the meeting was performed on 30 May 2006. At that time it was impossible for the companies to know the results of the procurement procedure, as the deadline for the tenders submission was set on 7 June 2006 and the two associations had not submitted their tender offers. Moreover, the Swarco consortium was communicated the disqualification result only on 19 June 2006.

Since the investigated parties could provide no rational justification, the RCC reached the conclusion that the companies’ actions pursued the transfer of the public procurement contracts related to lots 2 and 6 to the Swarco consortium, after being won at higher prices by the Plastidrum consortium.

The RCC also uncovered evidence of communication between the parties before submission, through an exchange of documents and sensitive information, which proved their cooperation in preparing the tender offers.

For example, the bidding documents submitted by the two associations contained suspicious identical typing mistakes. The RCC excluded the hypothesis of a mere coincidence, given that the standard forms did not present the same type of mistakes as those identified in the content of the bidding documents. Thus, RCC ascertained that the documents, after having been written by one of the bidders, were sent to the other bidder for filling in.

One of the companies defended, claiming that the typing mistakes were generated by the computer settings. The RCC dismissed this argument, showing that the respective words were not part of the category of words subject to automatic modification by the computer.

In addition, certain bidding documents were translated by the same translator and legalized by the same public notary, at the same date. For the RCC it was obvious that the documents in question were submitted for translation and legalization by the same person on the same day.

The companies argued that the law did not prohibit the translation and legalization of documents at the same translator or public notary. However, the RCC pointed out that the inexistence of such prohibition cannot lead to the possibility for bidders to prepare the tenders together.

The RCC considered that the investigation revealed sufficient and solid evidence to proceed to finding an infringement and that the parties could not provide a reasonable alternative explanation for their conduct.

In view of the above, the RCC concluded that by concluding an anticompetitive agreement, the two associations coordinated their tender offers in the public procurement procedure, by increasing the prices and subsequently sharing the public procurement contracts, which is similar to market sharing.

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