CADE investigates bid rigging in highways works of Arco do Rio de Janeiro in the scope of the “Car Wash” operation
The General Superintendence of the Administrative Council for Economic Defense – CADE initiated, on 5 July, the Administrative Inquiry No. 08700.003226/2017-33. The investigation concerns an alleged bid rigging in public bids conducted by the Secretariat of State for Public Works (Seobras in its acronym in Portuguese) for works of construction, maintenance and recovery of Arco Metropolitano of Rio de Janeiro highways.
The inquiry, another outcome of the “Car Wash Operation”, started from a leniency agreement signed between the company OAS Construction – and its current and former executives – and CADE jointly with the Federal Prosecution Service of Rio de Janeiro – (MPF/RJ, in its acronym in Portuguese). Through the leniency agreement, the signatories involved in the scheme admitted their participation in the anticompetitive conduct and provided information and evidence with the purpose of collaborating with the investigation of the alleged cartel.
This is the ninth leniency agreement signed by CADE in the scope of the “Car Wash Operation” and the first signed with the company OAS. The agreement concerns exclusively the bid rigging practice.
According to CADE’s General Superintendence, the violations to the economic order encompassed price fixing of proposals, provision of conditions, advantages and abstention of participation. Moreover, the companies coordinated costs, budgets and prices, divided market, through consortium formation, cover proposals, proposals suppression and subcontracting promises; and shared commercial and competitive sensitive information.
The most active companies in the anticompetitive conducted, pointed out as “G8”, are: the four leading companies, Carioca Chistiani Nielsen Engenharia S/A; Construtora Delta S/A; Construtora Norberto Odebrecht S/A and Construtora OAS S/A and, “mirror companies”, Construtora Andrade Gutierrez S/A; Construções e Comércio Camargo Corrêa S/A; Oriente Construção Civil; and Construtora Queiroz Galvão S/A.
In addition to these, another 15 companies were identified as secondary participants of the conduct. They would have presented cover proposals or even suppressed the presentation of different proposals, promising future compensation in other works. These companies are: Construtora Barbosa Mello S/A; Constran S/A Construções e Comércio; Construcap CCPS Engenharia e Comércio S/A; CR Almeida S/A Engenharia e Construções; Egesa Engenharia S/A; EIT Engenharia S/A; Equipav Engenharia Ltda.; Fidens Engenharia S/A; Mendes Júnior Trading e Engenharia S/A; Paulitec Construções Ltda.; S.A. Paulista de Construções e Comércio; Serveng Civilsan S.A. Empresas Associadas de Engenharia; Sobrenco Engenharia e Comércio Ltda.; Construtora Triunfo S/A; and Via Engenharia S/A.
The signatories of the leniency agreement mentioned another six companies as potential participants of the anticompetitive practice: DM Construtora de Obras Ltda.; EBTE Engenharia Ltda.; EMSA Empresa Sul Americana de Montagens S/A; Encalso Construções Ltda.; Construtora Ferreira Guedes; and Construtora A Gaspar S/A.
Moreover, the companies of projects designer Concremat Engenharia e Tecnologia S/A and Tecnosolo Engenharia S/A would have influenced the adoption of uniform conduct, because they received subsides of the companies involved in the bid rigging to designing basic and executive projects to Arco do Rio de Janeiro work. In that sense, Concremat and Tecnosolo would have facilitated access to the public bid to the colluding companies.
The Arco do Rio de Janeiro public bids concerned the works of construction, maintenance and recovery of interconnection between the highways BR-101/North to BR-101/South. The communications related to the conduct started in January 2007, between the companies, Carioca, Delta, OAS and Odebrecht. It seems that the “mirror companies” Andrade Gutierrez, Camargo Corrêa, Oriente and Queiroz Galvão joined the anticompetitive practice in January 2017. They composed the so-called “G8 group” and started establishing agreements and discussing the criterion for formation of four consortiums to the leasing of four stages of Arco do Rio de Janeiro construction. Apparently, each consortium was formed by a “leader company" and a “mirror company”.
The evidence indicated that, starting from June 2007, the “G8” coordinated activities to study projects, assist each other in the elaboration of the note of pre-qualification and composed the bid committee. The purpose was to define technical requirements in the public bid notice aiming at limiting the participation of other companies.
However, despite their efforts several non-aligned companies were approved in the pre-qualification phase results, released in January 2008. It might have motivated the “G8” to contact these other companies in order to integrate them in the agreement previously adjusted, combining the presentation of cover proposals or proposals suppression.
At least other 15 companies were incorporated to the scheme and another six possibly participated and/or had knowledge of the anticompetitive agreement, allowing the “G8” companies to won the bid. At the final of the public bid, the anticompetitive agreement was maintained and the four consortiums composed by the “G8” companies were the winners of the four public bids selection process.
Anticompetitive Conduct Records and Administrative Inquiry
Part of the Leniency Agreement consists in a document called the Anticompetitive Conduct Records (HC, for its acronym in Portuguese), in which CADE’s General Superintendence describes in detail the anticompetitive practice as reported by the signatories and complemented by the probative documents submitted. By mutual agreement, CADE, MPF/RJ and the signatories have partially waived the confidentiality of the agreement and its annexes.
At the end of the Administrative Inquiry, CADE´s General Superintendence decides to initiate an Administrative Proceeding, in which the evidences of an economic infraction are gathered and the individuals and legal entities are notified to present their statements. 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 conviction or the filing of the case concerning 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 isresponsibility of the Administrative Tribunal, which may impose fines of up to 20% of a company´s turnover. Fines ranging from BRL 50 thousand to BRL 2 billion may also be imposed to 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.
This is the ninth leniency agreement signed with CADE within the scope of the “Car Wash Operation”. The previous agreements were signed with Setal/SOG and employees concerning the public bids in Petrobras’ onshore platforms; with the company Camargo Corrêa and employees in public bids regarding Angra 3 nuclear plant and the North-South and West-East Railroads; with Camargo Corrêa and its current and former employees in public bids regarding the implantation of the North-South railway and of the West-East integration railway; with Andrade Gutierrez and executives of the company; the first one 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 its current and former executives regarding public bids for the construction of World Cup 2014 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.