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CADE investigates bid rigging in public bids conducted by Rio de Janeiro’s City Hall in the scope of the “Car Wash” operation

Leniency

Inquiry is linked to a leniency agreement signed with CADE, MPF/RJ and Carioca Engenharia
published: Oct 11, 2017 06:52 PM last modified: Oct 11, 2017 06:52 PM

The General Superintendence of the Administrative Council for Economic Defense – CADE is investigating, under the scope of the Administrative Inquiry No. 08700.003344/2017-41, an alleged bid rigging in public bids conducted by the Secretariat for Public Works of Rio de Janeiro (SMO/RJ in its acronym in Portuguese) for hiring services of engineering and construction of large road systems.

The inquiry is another outcome of the “Car Wash Operation”. The investigation started from a leniency agreement jointly signed by CADE and the Federal Prosecution Service of Rio de Janeiro (MPF/RJ in its acronym in Portuguese) with the company Carioca Christiani-Nielsen Engenharia S/A and its current and former executives, last June. The agreement and evidence obtained subsidized the outbreak of the “Rio 40 degree operation”, conducted by MPF/RJ and the Federal Police in August 2017. The information of the agreement remained temporarily restricted aiming at avoiding harm to the ongoing investigation at MPF/RJ and CADE.

This is the eleventh leniency agreement signed with CADE within the scope of the “Car Wash Operation”. By means of the agreement, 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 only the anticompetitive practices.

The signatories declared that five companies – Carioca Christiani-Nielsen Engenharia S/A, Construtora Andrade Gutierrez S/A, Construtora Norberto Odebrecht Brasil S/A, Construtora OAS S/A and Construtora Queiroz Galvão S/A – were the most active companies in the anticompetitive conduct. It seems that the companies Construções e Comércio Camargo Corrêa S/A, Contern Construção e Comércio S/A and Delta Construções S/A were involved in the anticompetitive scheme with a less substantial participation. In addition, at least ten employees or former employees of these companies were pointed as alleged participants in the conduct. According to the signatories, the contacts between the competitors initiated in November and December 2009 and remained periodically until 2014.

So far, there is evidence that the anticompetitive practice possibly affected at least the public bids for works of the road corridors “Transcarioca”, “Transbrasil” and “Transoeste”. It is possible that other public works conducted by Rio de Janeiro’s City Hall were also affected by the anticompetitive conduct. The signatories of the leniency agreement informed that clauses of the public bids notice for road corridors Transcarioca, Transbrasil and Transoeste were targeted by the cartel’s participants, by means of telephonic calls held with public servants and politicians of Rio de Janeiro’s City Hall. The conduct aimed at restraining medium and small companies’ access to these public bids, favoring the companies involved in the scheme. The signatories also reported that in each public bid the competitors agreed to fix prices, established conditions and advantages and divided the public bids among themselves, by presenting cover proposals or even suppressing the presentation of proposals.

Anticompetitive Conduct Records and Administrative Inquiry

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 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 whether 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 is responsibility of CADE’s 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.

There are other ten leniency agreements 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 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.