CADE investigates bid rigging in infrastructure and road transport bids in São Paulo
The General Superintendence of the Administrative Council for Economic Defense – CADE investigates two alleged bid riggings involving infrastructure and road transport bids in São Paulo. One of them is related to the construction of the “Rodoanel Mario Covas”, at least in its south part, in a procurement conducted by the Desenvolvimento Rodoviário S/A – Dersa (Administrative Inquiry 08700.004468/2017-44). The other is related to bids promoted by Dersa and the Empresa Municipal de Urbanização – EMURB to the implementation of the Program for the Development of the São Paulo Metropolitan Strategic Road System (Administrative Inquiry 08700.003240/2017-37).
The inquiries are outcomes of the “Car Wash” Operation and were subsidized by the signature, in last July, of leniency agreements with the Construtora Norberto Odebrecht S/A and its current and former executives. The deals were signed by CADE together with the Federal Prosecution Service in São Paulo (MPF/SP in its acronym in Portuguese).
These are the thirteenth and the fourteenth public leniency agreement signed with CADE within the scope of the “Car Wash” Operation. By means of the agreements, the signatories admitted their participation in the anticompetitive conduct and provided information and evidence with the purpose of collaborating with the investigation of the alleged cartel. The agreement encompasses exclusively anticompetitive practices.
Both the administrative inquiries were initiated on 2 August of 2017.
The signatories of the leniency agreement indicated that the anticompetitive conduct involved, at least, 22 companies, and its actions can be divided into three stages.
In Stage 1 (Preliminary), five leading companies started to gather to discuss the particularities of the Rodoanel public work, which was going to be bid, and to discuss the possibility of a joint venture. The companies are: Construtora Andrade Gutierrez S/A, Construções e Comércio Camargo Correa S/A, Construtora Norberto Odebrecht S/A, Construtora OAS S/A and Construtora Queiroz Galvão S/A. The contacts would have started in June 2004 and lasted, at least, until April 2007.
In Stage 2 (Cartel Strategy Elaboration), already in consortium with the leaders, other five companies that had a relevant technical capacity and could be strong competitors in the bidding, joined the colluding. They are: Constran S/A Construções e Comércio, CR Almeida S/A Engenharia, Galvão Engenharia S/A, Mendes Junior Trading S/A and Serveng-Civilsan S/A.
In Stage 3 (Final), after the technical qualification of the companies that were not aligned to the group, other twelve companies adhered to the cartel, agreeing to present a cover proposal and/or suppress proposals under the promise of subcontracting or collaboration in future negotiations. The contacted and after aligned companies are: ARG Construtora Ltda., Carioca Christiani Nielsen Engenharia S/A, Cetenco Engenharia S/A, Construbase Engenharia Ltda., Empresa Industrial Técnica S/A, Empresa Sul Americana de Montagens S/A, Construtora A. Gaspar S/A, M. Martins Engenharia e Comércio S/A, S/A Paulista de Construções e Comércio, Sobrenco Engenharia e Comércio Ltda., Usiminas Mecânica S/A and Via Engenharia S/A.
According to the Leniency Agreement signatories, the anticompetitive conducts were enabled by in-person meetings and telephone calls between the companies’ representatives to sign agreements in order to suppress or reduce the competitiveness in the bidding promoted by Dersa. The goal of the contacts was to agree upon bid winners, price offers, conditions, lots division, abstentions and cover proposals, among others.
Part of the Leniency Agreement consists in a document called the Anticompetitive Conduct Records (HC in its acronym in Portuguese), in which CADE’s General Superintendence describes in detail the anticompetitive practice as reported by the signatories and subsided by the probationary documents submitted. By mutual agreement, CADE, MPF/SP, and the signatories have partially dismissed the confidentiality of the agreement and its annexes.
The signatories indicated that the anticompetitive conduct had as objective at least seven biddings related to the implementation of the Program for the Development of the São Paulo Metropolitan Strategic Road System: Avenida Roberto Marinho, Nova Marginal Tietê, Complexo Jacú Pêssego, Chucri Zaidan, Avenida Cruzeiro do Sul, Avenida Sena Madureira and Córrego Ponte Baixa.
The signatories’ reports pointed out that the conduct happened continuously between 2008 and 2015, and can be described in three phases. The basis of the anticompetitive conduct would have been formed on Stage 1 (Preliminary Anticompetitive Contacts, 2008), in which the group of the “Big Contractors” participated. It was formed, at least, by the companies Andrade Gutierrez, Camargo Corrêa, OAS, Odebrecht and Queiroz Galvão.
In Stage 2 (Cartel Implementation, from 2009 to 2011), at least 19 companies participated in the colluding, acting to fix prices and share the bids trough the presentation of cover proposals. Besides the “Big Contractors”, have acted in this phase: Carioca Christiani Nielsen Engenharia S/A, Cetenco Engenharia S/A, Constran S/A Construções e Comércio, Construtora Cowan S/A, Construbase Engenharia Ltda., Contern Construções e Comércio Ltda., Construções e Comércio Camargo Correa S/A, Construtora Andrade Gutierrez S/A, Construtora OAS S/A, Construtora Queiroz Galvão S/A, CR Almeida S/A Engenharia e Construções, Delta Construções S/A, Empresa Industrial Técnica S/A, Encalso Construções Ltda., Galvão Engenharia S/A, Mendes Junior Trading S/A, Odebrecht Engenharia e Construção Internacional S/A, SA Paulista de Construções and Comércio and Serveng-Civilsan S/A - Empresas Associadas de Engenharia.
The signatories indicated seven companies as possible actors on this anticompetitive conduct stage, since they participated of the bids in joint venture with companies aligned to the cartel: Construtora Barbosa Mello, Egesa Engenharia S/A, Empresa Sul Americana de Montagens S/A, Engeform Engenharia Ltda., Paulitec Construções S/A, Sobrenco Engenharia e Comercial Ltda. and Via Engenharia S/A.
In the end, on Stage 3 (Anticompetitive Contacts after the Signing of Contracts, between 2014 and 2015), four companies, members of the “Big Contractors”, (Andrade Gutierrez, OAS, Odebrecht and Queiroz Galvão), together with the company Construbase, maintained anticompetitive contacts for the sharing of sensitive commercial information.
According to what was reported in the leniency agreement, such conducts were enabled due to in-person meetings, beyond telephonic and electronic contacts, that aimed the suppression of competitiveness of the bids, with a previous agreement regarding bid winners, price offers, conditions, lots division, cover proposals, among others.
At this stage, the defendants will be notified to present their defense. In the end of the investigation, the General Superintendence issues an opinion on the condemnation or the filing of the case regarding each defendant. The conclusions are then forwarded to CADE’s Administrative Tribunal, which is responsible for issuing a final decision.
The final judgment in the administrative sphere is a responsibility of CADE’s Administrative Tribunal, which may impose fines of up to 20% of a company´s turnover. If identified and sentenced, fines ranging from BRL 50 thousand to BRL 2 billion may also be imposed on individuals. The Tribunal may also take other measures that it deems necessary to cease the conduct.
CADE's Leniency Agreements
According to the Law 12.529/2011, the leniency agreement has the purpose of obtaining information and documents that prove a cartel, as well as identifying the other participants in the conduct.
There are other twelve leniency agreements signed with CADE within the scope of the “Car Wash Operation”. The previous agreements were signed with Setal/SOG and it employees concerning the public bids in Petrobras’ onshore platforms; with Camargo Corrêa and its current and former employees in public bids regarding Angra 3 nuclear plant, the implantation of the North-South railway and of the West-East integration railway and other regarding an alleged cartel in infrastructure bids of subways and monorail in seven states and in the Federal District; with Andrade Gutierrez and executives of the company: the first regarding an alleged cartel in the public bids to build and operate the Belo Monte hydroelectric power plant; the second agreement due to an alleged cartel in the public bid for engineering and construction works for the urban improvement of the Alemão, Manguinhos and Rocinha neighborhoods in Rio de Janeiro; with Carioca Christiani Engenharia and its current and former executives regarding Petrobras’ headquarters; with Andrade Gutierrez and its current and former executives regarding public bids for the construction of 2014 World Cup stadiums; and with Andrade Gutierrez S/A and its current and former executives regarding an alleged bid rigging in public bids conducted by the Secretariat of State for the Environment of Rio de Janeiro for recovery works and environmental revitalization of lakes in urban areas and containment works and flood control of rivers, including engineering services, dredging, desorption and construction of dams and jetties; and two with OAS – one regarding an alleged bid rigging in highways works of Arco do Rio de Janeiro and other related to a bid rigging in infrastructure works of urban mobility in the Federal District.